KEY INVESTMENT HIGHLIGHTS

• Losses were within our expectation

• Revenue in 3QFY19 inched down -1.2%yoy

• Pressure on margin could largely remain

• Earnings left unchanged

• Maintain our NEUTRAL call with unchanged TP of RM3.29

The FYE of the group has been changed from 31 Dec to 31 June.

We noted that the next set of audited financial statements shall be for a period of eighteen months from 1 Jan 2019 to 30 June 2020. The comparison we inferred below was for reference on its YOY performance.

Losses were within our expectation. The group’s 3QFY19 earnings remain in the red. While it posted losses of -RM37.1m in the quarter, the quantum was less by -41.1%yoy compared to the same period last year. Cumulatively, it extended previous quarterly loss to the tune of - RM131.8m in 9MFY19, accounting for 72% and 89% of ours and consensus’ respectively.

Revenue booked in 3QFY19 inched down by -1.2%yoy. Lafarge’s revenue decreased to RM465.9m. The decline was attributable to lower sales both in volume and prices from the cement segment due to the lingering condition of weak domestic market. However, it was partially offset by the higher export sales as well as improved sales by its Singapore subsidiary.

Pressure on margin could largely remain. Highly competitive landscape and over-supply in the market could be dampener factors for supply and demand environment in the short-term. Accordingly, we believe these factors will remain a stumbling block for Malayan Cement to stage a major turnaround in the immediate term. In a bigger context, we think the current overall demand for the industry remains lackluster.

Earnings left unchanged. We make no changes to our estimates, given that its YTD earnings came in within our expectation.

Recommendation. Altogether, we maintain our NEUTRAL recommendation on Malayan Cement. Whilst the outcome on cost cutting measures seems to bear fruits, we still think that demand is still sluggish. Our TP was unchanged at RM3.29 as we ascribe the FY20 BVPS to PBV of 1.1 times

Source: MIDF Research - 27 Nov 2019