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THAILAND EQUITY RESEARCH
Page | 1 | PHILLIP SECURITIES (THAILAND)
The Siam Cement 4QFY15 core profit seen down 16% y‐y
THAILAND | SET | CONMAT | COMPANY PREVIEW BLOOMBERG SCC TB l REUTERS SCC.BK
4QFY15 core profit seen down 16% y‐y We expect SCC to report a 16% y‐y drop in 4QFY15 core profit as a result of weakness from all core businesses. Cement/building materials business remained stuck in slow gear in 4QFY15 amid flat‐to‐slightly‐down cement demand as only two investment projects worth a combined Bt32bn under the government’s Bt1.6trn, 8‐year infrastructure investment plan were put up for bids during the period and construction activity in property sector remained weak though presales started to pick up in 2HFY15. The startup of new cement production lines in Cambodia and Indonesia also led SCC to shoulder the increasing burden of depreciation expenses as production still ran at a low level during the initial stages of operations. Chemicals business also felt the negative effects of (i) the oil price rout which would result in an inventory loss of around Bt800mn and (ii) the decline of US$92/ton and US$265/ton in HDPE‐naphtha and PP‐naphtha spreads respectively. The pace of contraction in PP‐naphtha spread was bigger than that of HDPE‐naphtha spread as a supply surplus of PP was higher than that of HDPE. However, SCC continued to benefit from lower fuel costs in the face of low oil prices which could help limit the pace of decline in its petrochemical performance. Packaging business softened due to plant maintenance shutdown which pushed operating expenses higher. Our forecast also assumes SCC booked net negative ex‐items of Bt549mn in 4QFY15, comprising (i) an after‐tax gain of Bt250mn from the divestment of TBSP and (ii) an inventory loss of around Bt800mn against net negative ex‐items of up to Bt2.7bn in 4QFY14 which came largely from an inventory loss. On this basis, we estimate SCC will post a 4% y‐y rise in 4QFY15 net profit to Bt9.1bn from Bt8.8bn in the same year‐ago period. Stripping out ex‐items, 4QFY15 core profit is expected to drop 16% y‐y to Bt9.7bn from Bt11.5bn a year earlier.
Earnings growth still possible for FY16 In our view, there remains room for earnings growth in FY16 on the prospects of a recovery in cement/building materials business and continued strong momentum in chemicals business. We believe cement/building materials business would get back on its growth track on expectations that cement demand will swing back to positive growth of 3%‐4% in FY16 helped by a growing pipeline of the government’s mega‐infrastructure projects lined up for bidding with construction slated to get off the ground in 2HFY16 and an increasing number of new project launches by property developers to take advantage of the government’s property stimulus measures. Nevertheless, new cement capacity of around 4mn tons, or 10% of the estimated full‐year demand of 40mn tons, from its rival TPIPL may exert some pressure on selling prices but regional markets should lend support to SCC’s growth as new capacity of 1.7mn tons and 1.8mn tons from its Cambodia and Myanmar operations which came online in late FY15 boosted its total production capacity by 11% and 6% in FY15‐FY16 respectively. Chemicals business should continue to perform well in FY16 on expectations that HDPE‐naphtha spread would stay between US$700‐US$800/ton, up slightly from FY15 while PP‐naphtha spread may drop slightly as the PP demand and supply situation looks worse than HDPE. However, SCC should benefit from oil price weakness as the prices of naphtha, a major component of costs are tied to oil prices. No margin downside is anticipated in FY16 as oil price volatility may not be as strong as in FY15 and inventory loss should be narrower than what it experienced in FY15. On balance, we see scope for SCC to deliver 9% profit growth in FY16. Update on petrochemical complex project in Vietnam Earlier SCC had a plan to jointly invest in a US$4.5bn petrochemical complex project in Vietnam with the Vietnamese government and another partner from Qatar. SCC would hold 46% interest of the JV with 29% held by the Vietnamense government and 25% by the Qatari partner. In the latest development, the Qatari partner has pulled out of the JV. The project is currently in the planning and design phase. For this reason, SCC needs to find a new partner with conclusion expected within the next six months. Note that this project has not yet been incorporated into our forecast. Valuation still cheap amid growth prospects for FY16 SCC remains our top pick in the CONMAT space as it stands to benefit from the government’s mega infrastructure projects. Its continued earnings growth outlook and current valuation discount also give us an excuse to reiterate a ‘BUY’ call on SCC shares with a Bt560/share target price.
Ref. No.: CO2015_0026
Closing Price(Bt) 414.00
Target Price(Bt) 560.00 (+39.06%)
COMPANY DATA
O/S Shares (mn) : 1,200
Market Cap. (Btmn) :
Market Cap. (USDmn) :
52‐WK Hi/Lo (Bt) : 554/404
3M Average Daily T/O (mn) : 1.81
Par Value (Bt) : 1.00
MAJOR SHAREHOLDERS (%)
1. Crown Bureau of Property 30.0
2. Thai NVDR 8.8
3. CHASE NOMINEES LIMITED 4.4
PRICE PERFORMANCE (%)
1MTH 3MTH 1YR
ABS ‐2% ‐13% ‐7%
REL TO SET INDEX ‐3% ‐4% 12%
PRICE VS SET INDEX
Source: Bloomberg, PSR
KEY FINANCIALS
FYE Dec FY14 FY15E FY16E FY17E
Sales(Btmn) 497,469 452,816 467,770 495,350
Net Profit(Btmn) 33,615 43,117 47,139 50,454
EPS (Bt) 28.01 35.93 39.28 42.05
P/E (X) 14.8 11.5 10.5 9.8
BVPS (Bt) 174.43 202.19 233.86 268.29
P/B (X) 2.4 2.0 1.8 1.5
DPS (Bt) 12.50 14.37 15.71 16.82
Dividend Yield (%) 3.0 3.5 3.8 4.1
ROE (%) 19.82 22.63 21.53 20.11
Debt/Equity (X) 2.12 1.99 1.94 1.61
Source: Company, PSR Est.
**Multiples and yields are based on latest closing price
VALUATION METHOD
DCF (WACC: 9.9%; terminal g: 5%)
Danai Tunyaphisitchai, CFA
Capital Market Investment Analyst # 2375
Tel: 66 2 635 1700 # 481
496,800
13,706
14 August 2015
Buy (Maintain)
14 January 2016
0
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Jan‐13 Jan‐14 Jan‐15 Jan‐16
SCC TB EQUITY SETI (rebased)
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 2 | P a g e
Corporate Governance ‐2015
ADVANC BAFS BCP BIGC BTS CK CPN DRT DTAC DTC
EASTW EGCO GRAMMY HANA HMPRO INTUCH IRPC IVL KBANK KCE
KKP KTB LHBANK LPN MCOT MINT MONO NKI PHOL PPS
PS PSL PTT PTTEP PTTGC QTC RATCH ROBINS SAMART SAMTEL
SAT SC SCB SCC SE‐ED SIM SNC SPALI THCOM TISCO
TKT TMB TOP VGI WACOAL
AAV ACAP AGE AHC AKP AMATA ANAN AOT APCS ARIP
ASIMAR ASK ASP BANPU BAY BBL BDMS BECL BKI BLA
BMCL BOL BROOK BWG CENTEL CFRESH CHO CIMBT CM CNT
COL CPF CPI CSL DCC DELTA DEMCO ECF EE ERW
GBX GC GFPT GLOBAL GUNKUL HEMRAJ HOTPOT HYDRO ICC ICHI
INET IRC KSL KTC LANNA LH LOXLEY LRH MACO MBK
MC MEGA MFEC NBC NCH NINE NSI NTV OCC OGC
OISHI OTO PAP PDI PE PG PJW PM PPP PR
PRANDA PREB PT PTG Q‐CON QH RS S & J SABINA SAMCO
SCG SEAFCO SFP SIAM SINGER SIS SITHAI SMK SMPC SMT
SNP SPI SSF SSI SSSC SST STA STEC SVI SWC
SYMC SYNTEC TASCO TBSP TCAP TF TGCI THAI THANA THANI
THIP THRE THREL TICON TIP TIPCO TK TKS TMI TMILL
TMT TNDT TNITY TNL TOG TPC TPCORP TRC TRU TRUE
TSC TSTE TSTH TTA TTCL TTW TU TVD TVO TWFP
TWS UAC UT UV VNT WAVE WINNER YUASA ZMICO
2S AEC AEONTS AF AH AIRA AIT AJ AKR AMANAH
AMARIN AP APCO AQUA AS ASIA AUCT AYUD BA BEAUTY
BEC BFIT BH BIG BJC BJCHI BKD BTNC CBG CGD
CHG CHOW CI CITY CKP CNS CPALL CPL CSC CSP
CSS CTW DNA EARTH EASON ECL EFORL ESSO FE FIRE
FOCUS FORTH FPI FSMART FSS FVC GCAP GENCO GL GLAND
GLOW GOLD GYT HTC HTECH IEC IFEC IFS IHL IRCP
ITD JSP JTS JUBILE KASET KBS KCAR KGI KKC KTIS
KWC KYE L&E LALIN LHK LIT LIVE LST M MAJOR
MAKRO MATCH MATI MBKET M‐CHAI MFC MILL MJD MK MODERN
MOONG MPG MSC MTI MTLS NC NOK NUSA NWR NYT
OCEAN PACE PATO PB PCA PCSGH PDG PF PICO PL
PLANB PLAT PPM PRG PRIN PSTC PTL PYLON QLT RCI
RCL RICHY RML RPC S SALEE SAPPE SAWAD SCCC SCN
SCP SEAOIL SIRI SKR SMG SOLAR SORKON SPA SPC SPCG
SPPT SPVI SRICHA SSC STANLY STPI SUC SUSCO SUTHA SYNEX
TAE TAKUNI TCC TCCC TCJ TEAM TFD TFI TIC TIW
TLUXE TMC TMD TOPP TPCH TPIPL TRT TSE TSR UMI
UP UPF UPOIC UREKA UWC VIBHA VIH VPO WHA WIN
XO
Score Range
< 50%
50‐59%
60‐69%
70‐79%
80‐89%
90‐100%
The disclosure of the survey result of the Thai Institute of Directors Association (IOD)
regarding corporate governance is made pursuant to the Office of the Securities and
Exchange Commission. The survey of the IOD is based on the information of a company
l isted on the Stock Exchange of Thailand and the Market for Alternative disclosure to the
public and able to be accessed by a general public investor. The results, therefore, is from
the perspective of a third party. It is not an evaluation of operation and is not based on
inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai
Listed Companies. As a result, the survey result may be changed after that data. Phil l ip
Securities (Thailand) of securities company does not confirm nor certify the accuracy of
such survey result.
No logo given
Number of Logo
Results Presentation
THAILAND EQUITY RESEARCH
PHILLIP SECURITIESS (THAILAND) | 3 | P a g e
Industry Group Name Sector Name Sector Index
Agro & Food Industry[AGRO] Agribusiness AGRI
Food & Beverage FOOD
Consumer Products[CONSUMP] Fashion FASHION
Home & Office Products HOME
Personal Products & Pharmaceuticals PERSON
Financials [FINCIAL] Banking BANK
Finance & Securities FIN
Insurance INSUR
Industrials [INDUS] Automotive AUTO
Industrial Materials & Machinery IMM
Packaging PKG
Paper & Printing Materials PAPER
Petrochemicals & Chemicals PETRO
Steel STEEL
Property & Construction[PROPCON] Construction Materials CONMAT
Construction Services CONS
Property Development PROP
Property Fund & REITs PF&REIT
Resources [RESOURC] Energy & Util ities ENERG
Mining MINE
Services [SERVICE] Commerce COMM
Media & Publishing MEDIA
Health Care Services HELTH
Tourism & Leisure TOURISM
Professional Services PROF
Transportation & Logistics TRANS
Technology [TECH] Electronic Components ETRON
Information & Communication Technology ICT
PSR Rating SystemCapital Gain Recommendation
> 15% BUY
> 5% ‐ 15% ACCUMULATE / TRADING BUY
> 0% ‐ 5% NEUTRAL
0 <= SELL
Remarks
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors l ike (but
not l imited to) a stock's risk reward profi le, market sentiment, recent rate of share price appreciation, presence or absence of
stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
22776846
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