Results

1QFY14 net profit of RM73.9m (yoy: +36.1%; qoq: -43%) accounted for 20.8% and 18.5% of our and consensus fullyear forecasts. We consider the results within expectations as 1Q is traditionally weaker on the back of shorter working days. Historically, 1Q accounted for less than 20% of fullyear earnings.

Deviations 

None

Dividend

Declared 1st interim single-tier DPS of 9 sen (ex date: 17 Jun 14; payment date: 16 Jul 14). For the full-year, we are projecting a total DPS of 40 sen (translating to a yield of 4.3%).

Highlights

YoY… 1QFY14 net profit increased by 36.1% to RM73.9m mainly on the back of higher domestic cement and concrete sales and higher net interest income.

QoQ. 1QFY14 net profit declined by 43% to RM73.9m (against a revenue decline of 9.9%) mainly on the back of: (1) seasonally weaker domestic cement demand (on shorter working days); and (2) Losses at the associate unit.

Net cash increased further to RM517.1m (60.8 sen) from RM450.9m (53 sen) in the previous quarter. We continue to hold the view that dividend payout will remain generous, given: (1) its healthy cash pile; (2) its strong cash generation ability; and (3) the absence of significant capex.

Risks

• Delays in the implementation of projects under the ETP, resulting in lower-than-expected demand for cement consumption;
• Price war intensifies; and
• Steep rise in energy prices, in particular, coal and electricity.

Forecasts

Maintain for now, pending further update from analyst briefing next week.

Rating

BUY

Positives –

(1) Positive cement demand outlook;

(2) Largest cement player;

(3) Strong balance sheet; and (

4) Generous dividend payout

Negatives – Illiquid share trading volume.

Valuation

Maintain TP of RM9.74 (based on unchanged 19.5x 2015 EPS of 49.9 sen), Maintain BUY.

Source: Hong Leong Investment Bank Research - 23 May 2014