Nick Cashmore is in the writing mood. This time around, he highlights the attractive long term characteristics of the cement sector. The industry is facing a cyclical slowdown this year but there are good structural reasons to remain OWT the sector.
Key points from the report:
Cyclical slowdown in demand this year, due to a sharp slowdown in the economy.
Attractive LT characteristics: cement consumption per capita has also risen by an annual compound growth rate of 7.2%; demand could double again to 76mn tonnes by 2018.
Long run demographic drivers: population, urbanization, and household formation.
Industry is in excellent shape. Industry revenue 18.8% CAGR and op income 20.6% CAGR over the last decade.
Balance sheet getting stronger. Since 2004, total debt outstanding has halved to Rp5.1tn, net debt plunged from $1bn to US$43mn.
The Indonesian cement industry is also an oligopoly with 3 big listed players control 91% of the market:
Indocement (INTP IJ, OPF): financial difficulties at one of major shareholders at parent Heidelberger = higher dividends and possibility corporate action?
Semen Gresik (SMGR IJ, OPF): expanding capacity to 24.3mn tonnes, but not until 2014.
Holcim Indonesia (SMCB IJ): the smallest of the 3,l earnings swing by FX translations.
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