cement demand will continue to drop due to cancellation of big projects, thank to the new government. all the likelihood that price can go south, fall below RM 2
cement is basically a commodity and in the soft market, all cement players are competing based on price. Unless construction activities pick up, the cement price will continue to come under pressure
It has been 5 months since my last review and price has adjusting toward the target price of 1.95. Due to the continue subdue growth in construction & property industry, continued losses is expected. Fair price further reduced to 1.60 @ 0.5x NTA.
shpg22 Based on the expectation of slowing down in construction sector as a result of new gov policy, expect the demand for cement to be seriously impacted. LAFMSIA losses is expected to be intensified. Fair value is further reduced to 1.95 @ 0.6x P/B @ 40% discount to book. 30/05/2018 11:43
3Q18 result marks the 7th consecutive quarterly losses by Lafarge. And things are not expected to be any better in the near to mid term given the depressing cement price (of around RM186/tonne) which was affected by the softer demand from the construction and property sectors but also due to the oversupply of cement in the Peninsular market. Most cement companies had decided to expend their capacity earlier to take advantages of the potential high demands from mainly the big government projects (MRT, LRT, ECRL, HSR etc). But all these demands evaporated when the new government had decided to cancel, hold off or scale down most of these projects.
None of the analyst that are covering this company are projecting any profit in 2019. Investors need to be prepared for the company to continue posting loses up to FY19 at least albeit at a lower level thanks to the management cost rationalisation plans to be implemented in the near to mid-term. Any turnaround will still depend on the improvement of the cement price which will only happen if the government decides to refocus back on infrastructure spending.
If you are looking to diversify your portfolio outside of Lafarge (due to perceived future negative earnings in the near to mid-term), I would recommend you to look at MBMR.
MBMR is a direct proxy to Perodua via its 22.6% interest in the company. Valuation is cheap at only 5.5x PE (based on target FY18 PATAMI of RM145mil. 9m PATAMI is already RM106mil). PB is low at only 0.5x BV. 4Q18 results is expected to be higher than 3Q18 and last year's 4Q17.
For FY19 growth will be driven by the still high demand of new Myvi and the launch of the new SUV in 1Q19 and also the new Alza in 2H19.
Please go through the analyst reports (https://klse.i3investor.com/servlets/stk/pt/5983.jsp) and do your own analysis before making any decisions. Most analysts have a TP of above RM3 for the company with Hong Leong being the lowest at RM3.13 and Maybank the highest at RM4.18.
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wilsonchan87
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Posted by wilsonchan87 > 2018-09-25 19:48 | Report Abuse
2.5-2.8 is good zone to accumulate