Malaysia’s CIMA rated as ’strong buy’

Malaysia’s CIMA rated as ’strong buy’
Published: 22 May 2007

Standard & Poor’s Equities Research said it has kept its ’’strong buy’’ call on Cement Industries Of Malaysia (CIMA) with a target price of 7.50 rgt on expectations of improved earnings ahead after the company’s first quarter results were ’’in line’’ with its expectations.

"We expect CIMA to report better earnings in the following quarters given expectations of higher demand to follow through once the Ninth Malaysia Plan (9MP) projects are implemented and the increase in production capacity by about 150,000tpa from July 2007 to cater to expected stronger demand,’’ it said, noting that the current capacity is 3.4Mta.

"The upgrade of its two cement plants in Perlis and Negri Sembilan will improve production efficiency and reduce costs. Furthermore, as volume sales improve, we expect the increase in pricing to flow through to the group’s bottomline,’’ S&P said in a note to clients.

The research house said the risks to its recommendation and target price ’’include slower demand arising from a longer-than-expected rollout of 9MP projects, higher-than-expected raw material and energy costs, and an unexpected round of cement price war.’’