FY06 net profit fell 9% YoY to Bt29.45bn, while 4Q06 net profit dropped 8% y-o-y and 39% q-o-q to Bt4.67bn, below expectations. Besides poor performance at all business units, 4Q06 results also included a net loss from asset divestment. Excluding non-recurring items, FY06 normalised net profit fell 2% y-o-y, and 4Q06 normalised net profit fell 1% y-o-y and 40% q-o-q. SCC declared a final dividend of Bt7.5 (Bt15.0 for full-year). The share will go XD on 9 April 2007.
FY07F net profit had been lowered on expectations of lower domestic demand for cement and a stronger Baht. But the poor 4Q06 results indicate that we might have underestimated the impact of the weak Thai economy, which could offset the benefit of falling oil prices. Hence, the assumptions are revised.
Earnings outlook remains gloomy over the next 2-3 quarters due to the uncertain political situation, which could hurt consumer confidence and the Thai economy. But SCC should be able to offer attractive dividend yields of c. 6%. The counter represents a good rebound play when the political situation shows signs of improvement. A Hold rating is maintained and accumulating on weakness is recommended.