Siam Cement

Q4 2012F: Recovery on course BUY

Siam Cement Plc (SCC)

Q4 2012F net profit of Bt6.9bn. We estimate SCC's 4Q12F net profit at Bt6.9bn, +116%.

YoY and +8% QoQ. The improvement YoY comes from earnings recovery in all business

units from last year's low (flooded) base. The QoQ rise comes from the seasonal

dividend income from Toyota and the resumption of BST and Phoenix plants; these

were sufficient to overcome the seasonally weak sales volume in all business units. We

estimate 2H12F DPS at Bt5.5. Earnings will be announced on Jan 30.

4Q12 business unit details. Chemical unit: PE/PP spreads were relatively stable and

BST plant began partial operations in Oct 2012, once again bringing in income after the

absence of earnings contribution of ~Bt250mn/month since the May explosion. Paper

unit: sales volume improved slightly with little change in the gap between selling price

and cost; the Phoenix plant resumed operations in November to again begin

contributing earnings after the July fire removed its earnings contribution of

~Bt100mn/month. Cement and building materials units: we estimate growth in local

cement sales volume of ~15% YoY with growth in building material sales volume of

~10% YoY, with prices unchanged. Distribution unit: Earnings should be boosted by the

completion of the acquisition in GLOBAL (30percent stake) in November.

1Q13F earnings to improve. 1Q13F earnings are poised to rise upon high season for

sales volume at the chemical and non-chemical units. Chemical spreads are also

showing signs of improvement so far in the quarter from wider HDPE-naphtha (+15%

YoY and +31% QoQ) and PP-naphtha spreads (+10% YoY and +43% QoQ). Utilization rate

at BST and Phoenix plants will steadily go up after resuming operations in early 4Q12.

Raised earnings to reflect new investments. SCC is poised to reap a good harvest

from its massive investments in Asean (Indonesia, Vietnam, Philippines, Cambodia,

Thailand) valued at Bt85bn in 2011-12 (Table 1). Factoring in sizeable investment worth

~Bt40bn announced in 2H12 - distribution (GLOBAL) and ceramic tiles (Prime Group) in

2013, packaging paper in 2014, cement plants in Indonesia and Cambodia in 2015 - led

us to raise its earnings by Bt500mn (+2%) in 2013F, Bt1bn (+3%) in 2014F, Bt2bn (+4%) in

2015F and Bt3bn (+5%) in 2016F.

Maintain BUY. We maintain BUY with 12-month SOTP PT of Bt525 (from Bt430) to

reflect: 1) earnings revision; 2) incremental valuation from new investments at 1.5x

PBV to capture LT growth from the new assets. We like SCC for 1) the sector's most

outstanding earnings in 4Q12F (vs. drop QoQ for other players from seasonality);

2) strong three-year earnings growth of 25% backed by higher volume at the nonchemical

units, spread revival at the chemical unit and inorganic growth from its new

investments in ASEAN.