PETALING JAYA: Hume Cement Industries Bhd
is expected to remain on a steady growth trajectory despite near-term headwinds, underpinned by resilient margins, improving cash flows and stronger shareholder returns, according to UOB Kay Hian Research (UOBKH Research).
The research house said it anticipates softer earnings for Hume for the third quarter (3Q) of its financial year ending June 30, 2026 (FY26), in line with historical seasonal factors due to festive periods such as Chinese New Year and Hari Raya Aidilfitri.
It noted that this is driven by fewer working days, sequentially flattish cement average selling prices, and a slowdown in construction activity following the surge in diesel prices amid the ongoing Middle East conflict.
Despite the expected dip, UOBKH Research remains constructive on Hume, particularly following a strategic divestment.
“Recall that on March 4, Hume completed the disposal of its loss-making concrete business at RM215mil.
“Following the disposal, we expect a further strengthening of the company’s net cash position, reinforcing its position relative to peers that remain in net debt,” the research house said.
“As such, we anticipate an improvement in dividend payouts in 3Q26, in line with the company’s historical dividend distribution pattern in 1Q and 3Q,” UOBKH Research said.
It pegged the dividend payout assumption for FY26 to FY28 at 45%, bringing FY26 dividend per share to 14 sen, or a net dividend yield of 4.3%.
The research house maintained its “buy” call on Hume, with a higher target price of RM5, up from RM4.87, based on 15 times estimated price-earnings (PE) of FY26, which is lower than the industry’s 2011 to 2013 average PE of 19 times.
“We continue to like Hume for its above-industry-average margins, supported by a healthy utilisation rate and superior plant efficiency,” UOBKH Research said.
Meanwhile, sector-wide concerns have emerged following a sharp rebound in coal prices, with cement stocks retreating about 26% from recent highs.
However, UOBKH Research believes the impact on Hume is manageable.
“Actual implications may be limited. We believe the Newcastle coal benchmark may not accurately reflect Hume’s true cost exposure, as the company primarily utilises lower calorific value coal in its cement production process,” it added.
It highlighted the group’s operational flexibility and procurement strategy, noting its ability to source more cost-effective coal and stockpile during periods of lower prices to mitigate volatility.
Moreover, UOBKH Research said potential policy changes on cement imports are unlikely to disrupt the domestic market.
It stated that supply-demand dynamics remain intact due to ample local capacity, higher import costs and the product’s limited shelf life.
