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Siam City Cement

4Q13 profit shrinks, but full year profit makes new high BUY

Siam City Cement Plc (SCC)

- 4Q13 net profit is B752m, sliding 38% qoq

SCCC reported 4Q13 net profit at B752m, dropping 38% qoq. However,

excluding a Fx loss of B121m, the normalized profit was B873m, down

28% qoq, which was quite low when compared with the first three

quarters of the year. Although 4Q13 sales did not decrease significantly

because there was a support from cement and construction material

demands for continuous mega construction projects that allowed SCCC

to make sales of B7,384m, dropping 2%qoq, a maintenance shutdown of

cement kilns that had run at their full capacity in 9M13 and an expense

on a test run of the cement kiln #1 that will be reopened again have

made total expense in 4Q13 increase. Gross margin dropped to only

41.57%, whereas SG&A/sales rose to 26.9%. In addition, the company

booked shared profit from LANNA at B59m in this quarter. Overall,

FY2013 net profit was B4,796m, growing 32%yoy. The company

announced 2H13 dividend of B7/share, mounting a full year dividend to

B15/share. XD date is on 21 April 2014.

- New local and overseas production capacity to boost 2014 income and profit

Even though the political situation is pulling back new investments from

the government and private sector, the mega infrastructure projects and

property development projects that have continued from 2013 would

make domestic cement demands grow by 2-3% in 2014. The reopening

of the cement kiln#1 with a capacity of 1.5 million tons/year for a

commercial operation in early 2014 will help increase clinker export,

from almost zero in 2013. At the same time, sales of other construction

materials would also increase due to SCCC's plan to expand a capacity of

its super block factory for 2 million sq.m. and its Conwood factory that

will start a commercial run in 2Q14. Additional income from these

projects is a key driver for SCCC's profit in 2014.

- Upside and dividend yield still attractive. Buy

FY2014 net profit is projected to grow 11%yoy to B5,345m. Fair value at

18x PER is B418, implying 18% upside from the current share price.

Dividend yield is expected at 5%. Buy.

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