Reggy Sustanto (analyst) has upgraded his FY09-10 EPS estimate for Holcim Indonesia (SMCB) by 45% and 42%, lifting his PxT to Rp1,150 (26% upside). Currently the stock trades on 10.5x and 8.8x P/E for 2009-10, and on an EV/ton of US$112. Reggy’s FY09 estimate is 72% ahead of consensus on EBIT and 100% ahead on EPS.
The stronger-than-expected 1Q09 results drove the upgrade. Revenue +27% yoy, EBITDA +52% yoy, EBIT +90% yoy, ex-forex PBT +22% yoy (due to higher interest cost). The management said it would accelerate the debt repayment schedule, by re-paying US$60mn this year vs. initial plan of US$45mn (total debt of US$355mn).
The key surprise factor is resilience of the export market. While domestic revenue up 12% yoy, export revenue up by 193% to account for 19% of total revenue (from 8% in 1Q08). Average selling price (ASP) for export averaged at US$50/ton in 1Q09, up from US$37/ton in 4Q08 and US$34/ton in 1Q08. Two key drivers:
(1) More cement than clinker for export – SMCB commissioned its Ciwandan cement plan in 4Q08, perhaps allowing it to export more cement than clinker.
(2) More direct sales than via sister companies – In 1Q09 SMCB exports bigger proportion to African countries. In 2008, key export destination was Bangladesh, Brunei, and Malaysia through sister companies.
The positive 1Q09 progress appears to be sustainable, while the 2010 outlook on domestic market looks positive on (1) stable/improving political environment, (2) improving domestic liquidity and lower interest rates. The financial leverage on SMCB (124% net D/E), mostly on shareholders loan, should work on the company’s favour.
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