|
Siam Cement Pcl [SET:SCC], 31.94% owned by the investment arm of the Thai royal family's Crown Property Bureau, is Thailand's largest industrial conglomerate with operations in four business segments: Siam Cement Group (SCG) Cement-Building Materials, SCG chemicals, SCG paper and the joint investment in agricultural machines and automotive parts. The company said on October 28, 2015, that its third-quarter 2015 revenues were 110.9 billion baht, beating the 110.09 billion baht consensus estimate of 5 analysts, according to the Financial Times. The company posted third-quarter 2015 earnings of 7.5 baht per share, missing the 8.03 baht per share consensus estimate of 6 analysts.
SCC reported a dividend of 12.50 baht a share in 2014, which represents a 127.27% increase from 2013. The 22 analysts covering the company expect dividends of 16.37 baht a share for the upcoming fiscal year, representing a year-over-year increase of 30.92%. The next earnings announcement from SCC, for the fourth-quarter 2015, is expected on January 26. Analysts are expecting earnings of 7.93 baht per share on revenues of 129.7 billion baht.
In late September, SCC shares broke down the trendline supports below 460 baht per share, after Siam Commercial Bank Pcl [SET:SCB] sold its stake in Siam Cement Pcl to the Crown Property Bureau to raise 4.46 billion baht to help cover provisions for loans to struggling steel firm Sahaviriya Steel Industries [SET:SSI].
Siam Commercial Bank's chief executive Arthid Nanthawithaya said in a press conference that, "The Crown Property Bureau wanted to raise its stakes in Siam Cement. So, the shares changed hands in the same investor group." Investors were confused and didn't take the news very well, also dumping SCC when Siam Commercial Bank sold its Siam Cement shares.
In October, steelmaker SSI went into bankruptcy, leaving lenders including Krung Thai Bank [SET:KTB], Siam Commercial Bank and Tisco Bank [SET:TISCO] stuck with a debt of an estimated 50 billion baht, according to the Nikkei.
In early November, Siam Cement announced that its subsidiary, Kampot Cement, was expanding production capacity and diversifying its product line in Cambodia. The company plans to invest an additional 10 billion baht in Cambodia over the next five years, according to its strategic plan.
This might not be a coincidence as according to China Daily, China's leading cement equipment manufacturer, CITIC Heavy Industries Company, is also investing about 9 billion baht with its joint venture partner, Siam City Cement Public Company Limited, on a state-of-the-art cement plant in Cambodia to produce 5,000 tons of cement per day. The demand in Cambodia is estimated to be about 4 million tons per year.
At the end of December, Siam Cement said Kan Trakulhoon is retiring as president and chief executive and will be replaced in January by Roongrote Rangsiyopash, currently an executive vice-president of SCG. According to the press release, the succession has been planned for a long time and the company doesn't expect to miss a beat, even as a new economic landscape takes shape.
A significant headwind for SCC remains to be the declining trend in worldwide cement demand, due to a strong U.S. dollar and a slowdown in the global economy, which puts pressures on both volumes and prices. According to the Global Cement Trade Price Report (GCTPR) released in late December by US-based market researcher, CW Research, prices of the gray cement fell more than 11% year-on-year.
From our technical viewpoint, SCC is facing increasing downside risk, as the stock is bouncing along the lower trendline supports of the ascending wedge chart pattern. There is a trendline support at around the 400 baht level if the stock continues to pull back. SCC could gain some momentum if the recent 136 billion baht Thai government economic stimulus package's impact on Siam Cement’s top-and bottom-line is clarified.
According to the Financial Times, the consensus amongst 24 polled investment analysts covering Siam Cement gave the company an Outperform rating, with the median 12-month price target of 581 baht a share.
Disclosure: Long position and no recommendation. |
