1Q15
1Q15 core net profit (CNP) of RM76.7m came in within expectations, making up 22.1% and 22.2% of our and consensus expectations, respectively. We adjusted the CNP by excluding one-off items, namely unrealised forex gains of RM3.0m.
Within expectation. The company announced a first interim dividend of 8.0 sen. For the full-year, we expect a total dividend of 40.0 sen, which translates into net dividend yield of 4.2%.
QoQ, while 1Q15 revenue was marginally up by 1.7% to RM696.1m, 1Q15 CNP rose strongly by 55.3% to RM76.7m. Stronger bottomline performance was mainly attributable to: (i) earnings recovery in concrete division (returned to the black) driven by higher demand, and (ii) higher operating profit in cement segment (+39.6%) driven by higher sales and lower operating expense.
YoY, 1Q15 CNP rose marginally by 2.5% to RM76.7m, driven by higher cement and concrete sales, where both rose by 1.4% and 10.4%, respectively, thanks to stronger domestic demand.
We believe that domestic cement demand should remain resilient in FY15, in line with our in-house’s construction GDP growth forecast of 9.8%.
Nonetheless, we remain cautious on the cement players’ earnings outlook given that the persistent intense competition which will likely result in a price war. This is due to the expected 14% capacity expansion in Peninsular Malaysia until FY16.
Unchanged.
Maintain UNDERPERFORM
We maintain our TP at RM8.20 based on unchanged FY15E PER of 20.0x. Our TP implies a -0.5 SD discount on 5-year historical PER.
We think that LAFMSIA is overvalued at this juncture (currently trading at a Fwd-PER of 23.2x), given that the industry is still faced with intense competition. As such, we maintain LAFMSIA at UNDERPERFORM.
Higher-than-expected cement prices
Lower-than-expected raw material and energy costs
Stronger-than-expected cement demand
Source: Kenanga Research - 21 May 2015
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