Highlights

Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Fri, 20 Nov 2020, 11:49 AM

 

Malayan Cement- Larger-than-expected Losses

Author:   |    Publish date:


Malayan Cement recorded larger-than-expected losses of RM185m in 15MFY20. The variance was mainly due to lower-than-expected revenue as cement demand shrank and its operation was disrupted, given the government’s Movement Control Order (MCO) to curb the spread of the Covid-19 outbreak. The impact of lower revenue was partly mitigated by lower operation costs. All in all, we increase our 18MFY20E core net loss to RM316m as we expect higher losses in 6QFY20 in view of the slowerthan-expected ramp-up of its operation. We maintain our HOLD call with a lower TP of RM2.63, based on a FY21E PBV of 1.0x.

Below Expectations

Malayan Cement’s 5QFY20 revenue plunged 33.6% yoy to RM357.9m (compared to RM538.7m in 1QFY20) due to the closure of its Rawang plant (which made up 20% of the group’s cement capacity) and the disruption of its operation due to the MCO since March 2020. Though the MCO affected only 2 weeks of 5QFY20, the impact was apparent as the group’s sales and billings were uneven especially for large customers. Its 5QFY20 core net loss widened by 4.2% yoy to RM29.1m. The drop in revenue was partly mitigated by the 34% yoy drop in operating costs as a result of the group’s cost rationalization initiatives. On a cumulative basis, the group recorded RM184.6m in core net loss in 15MFY20. This is below our expectations, accounting for 114% of our previous 18MFY20E loss estimate of RM161.6m.

Margin Improved on the Back of Cost Rationalization Initiatives

On a qoq basis, 5QFY20 core net loss narrowed by 16.7% to RM29.1m. Though revenue declined by 19.9% qoq to RM357.9m, core net loss narrowed on the back of lower operating costs (-21.1% qoq) partly due to lower admin expenses (-73% qoq) and lower cost of sales (-15% qoq). As a result, the EBITDA margin improved by 1.4ppt to 2.9% in 5QFY20.

Maintain HOLD With a Lower TP of RM2.63

We maintain our HOLD call on Malayan Cement with a lower TP of RM2.63, based on an unchanged FY21E PBV of 1.0x. While we believe the cement industry outlook remains challenging, we are cautiously optimistic of the company’s earnings prospect in FY21, given its plan to improve operational efficiency while cement prices gradually improve in view of a more rational pricing strategy. We think its losses will peak in 6QFY20, and expect gradual improvement in its financial performance in 1QFY21 onwards in tandem with a recovery in the construction sector.

Source: Affin Hwang Research - 17 Jun 2020

Share this
Labels: MCEMENT

Related Stocks

Chart Stock Name Last Change Volume 
MCEMENT 2.22 -0.11 (4.72%) 104,300 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Stock Screener using Technical and Fundamental criteria
MQ Affiliate
Join the MQ Affiliate Program today to earn rewards
 
 

175  856  550  881 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 AT 0.16-0.01 
 PHB 0.030.00 
 VIVOCOM 0.855-0.365 
 SAPNRG 0.115-0.005 
 PA 0.145-0.005 
 KANGER 0.18-0.015 
 KGROUP-WC 0.020.00 
 XDL 0.07-0.005 
 XOX 0.11-0.005 
 ARMADA 0.27-0.005 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. AN OVERLOOKED FOOD STOCK, TRADING AT 62% DISCOUNT TO NTA !!!! Bursa Master
2. Supermax is the best performer - Koon Yew Yin Koon Yew Yin's Blog
3. $$$ MTAG - Investing in UK’s richest man $$$ Buy and hold long-term
4. AT (0072) glove factory real? Have a look... Rubber Glove companies till year 2023
5. JAG - THE NEXT STRONGER PA IN THE MAKING LogicTrading Analysis
6. TOPGLOV, please update shareholders on the Klang Factory Covid-19 outbreak. 1500 cases? How it impact the factory? gloveharicut
7. TOPGLOVE plants in Meru to be temporarily closed. CIMB says No changes to FY21-23F EPS. Maintain BUY RM10.00 gloveharicut
8. TOPGLOV (7113) - Update on Share Buyback and EPF Movement, what is their average buying price from September till November? Bursa Malaysia Free Trading Education
PARTNERS & BROKERS