Results

1HFY14 net profit of RM151.2m (yoy: -5.1%; qoq: 42.3%) accounted for 42.5% and 38.3% of our and consensus fullyear forecasts. We consider the results within expectations as historically 1H is traditionally weaker than 2H on the back of shorter working days in 1Q.

Deviations

None

Dividend

Declared 2nd interim single-tier DPS of 9 sen (ex date: 12 Sep 14; payment date: 15 Oct 14). For the full-year, we are projecting a total DPS of 40 sen (translating to a yield of 3.9%).

Highlights

YoY… 2QFY14 revenue declined by 1.6% to RM717.2m. This was mainly due to lower revenue contribution from Aggregate and Concrete division that was caused by completion of a major project. Net profit declined by 5.1% to RM77.3.m mainly due to lower revenue, increased in electricity tariff, removal of fuel subsidy and a weaker Ringgit Malaysia.

QoQ. 2QFY14 net profit increased by 42.3% to RM77.3m mainly due to seasonally higher sales volume which was in line with stronger market demand compared to 1QFY14. 1QFY14 registered lower sales volume due to shorter working days.

Net cash declined to RM493.9m (58.13 sen) from RM516.7m (60.8 sen) in the previous quarter. We continue to hold the view that dividend payout will remain generous, given its healthy cash reserve, strong cash generation ability; and 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 on 9 Sep.

Rating

HOLD

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 HOLD for now. We will reevaluate pending the analyst briefing on 9 Sep.

Source: Hong Leong Investment Bank Research- 2 Sep 2014