PETALING JAYA: The earnings outlook for Malayan Cement Bhd
is seen to remain firm on good cement demand in the country.
CGS-International said the company is seen to also gain unlike its competitors which have raised prices to counter the effects of more stringent curbs on overloading of haulage vehicles/trucks by the Ministry of Transport.
Malayan Cement has instead kept its cement prices status quo, CGS-International said, basing upon updates from its management.
"However, the quantum of rebates Malayan Cement has offered its clients has also reduced. Hence, the higher implied prices now, coupled with a stronger ringgit and still low coal prices, should keep earnings before interest, taxes, depreciation and amortisation (EBITDA) margins firm," CGS-International said.
Malayan Cement is also exploring various methods of moving cement / concrete besides trucks.
"Given the strategic location of its plants, it is also able to use the rail network with port access. In our view, this strategy could see Malayan Cement build further on its market share in the domestic industry as of Nov 25," it said.
CGS-International retained its add rating on Malayan Cement on its dominant market share in the Malaysian cement industry, with a discounted cash flow-derived target price of RM9.00 per share.
Meanwhile, Hong Leong Investment Bank Research (HLIB Research) said lower electricity tariffs today under the regulatory period 4 (RP4) Automatic Fuel Adjustment framework have benefited the company as costs have come down.
"The RP4 now allows for monthly adjustments reflecting fuel costs and since July-25, tariffs have come off. The mechanism allows Malayan Cement's numbers to better reflect trend of weak coal prices. We estimate that every sen of AFA rebate reduces electricity costs by RM3mil-RM4mil per quarter," HLIB Research said.
The research house maintained its buy rating with a higher target price of RM7.55 per share from RM7.43 based on a fully diluted FY26 earnings per share to 19.7 times the price to earnings multiple - based on +0.5 standard deviation to the stock’s average trading multiples from 2008-2015.
