KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research says Lafarge (M) Cement Bhd expects total industry volume to increase by 4%-6% in 2011, underpinned by the implementation of large-scale infrastructure projects.
In its report on Thursday, March 3, it said Lafarge was bracing for higher cost of production as prices of coal (the contributor to energy cost), gypsum and paper bags have increased since last year.
'Management is working hard to improve its cost efficiency to contain the rise in production cost,' it said.
HLIB Research said export prices for cement unlikely to recover anytime soon, due to the strong ringgit and weak CONSTRUCTION [] activities in its targeted overseas markets.
However, Lafarge is expecting better performance at the Singaporean market as well as the ready-mixed concrete division.
As for its capex in FY11, it will remain around RM50m. There are no plans for further capacity expansion as current capacity will still be under-utilised despite having anticipating a pickup in demand.
'Effective tax rate will normalise from FY11 (from 15.4% in FY10) as reinvestment allowance has depleted. At RM7.37, the stock is currently trading at FY11 and FY12 P/E of 15.4x and 13.6x (based on consensus estimates), slightly higher than the 3-year historical forward P/E.
'We believe share price will likely warrant a re-rate if coal price decreases; and more projects are awarded,' said HLIB Research.
In its report on Thursday, March 3, it said Lafarge was bracing for higher cost of production as prices of coal (the contributor to energy cost), gypsum and paper bags have increased since last year.
'Management is working hard to improve its cost efficiency to contain the rise in production cost,' it said.
HLIB Research said export prices for cement unlikely to recover anytime soon, due to the strong ringgit and weak CONSTRUCTION [] activities in its targeted overseas markets.
However, Lafarge is expecting better performance at the Singaporean market as well as the ready-mixed concrete division.
As for its capex in FY11, it will remain around RM50m. There are no plans for further capacity expansion as current capacity will still be under-utilised despite having anticipating a pickup in demand.
'Effective tax rate will normalise from FY11 (from 15.4% in FY10) as reinvestment allowance has depleted. At RM7.37, the stock is currently trading at FY11 and FY12 P/E of 15.4x and 13.6x (based on consensus estimates), slightly higher than the 3-year historical forward P/E.
'We believe share price will likely warrant a re-rate if coal price decreases; and more projects are awarded,' said HLIB Research.
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