Thailand’s Siam Cement (SCC): Strong 3Q06 earnings driven by petrochemicals

Thailand’s Siam Cement (SCC): Strong 3Q06 earnings driven by petrochemicals
Published: 13 October 2006

Siam Cement (SCC) will announce its 3Q06 earnings on Oct 25 and the normalised profit is expected to be very strong at Bt8,982mn (EPS Bt7.49), up 19 per cent qoq and 12 per cent YoY. The petrochemical sector, with high HDPE and PP prices hitting new records last month has resulted in widening spreads between HDPE - Naphtha and PP - Naphtha.


2007 earnings prospects are expected to be maintained from this year. Petrochemicals should be slightly down from pricing and supply constraints, while a delay in the new project in Iran will dampen returns. Cement will show growth of around 5 per cent from negative growth this year and paper should grow inline with economic growth.


The prospects for the cathode ray tube (CRT) industry have taken a dramatic downturn. SCC plans to book a loss from Thai CRT of around Bt4,500mn in 2H2006. As this is non-cash, it will not affect the dividend payment policy, which is expected to be maintained at Bt15 per share this year.


SCC fair value is estimated at Bt270 based on a 2006 PER of 10x and an expected dividend of Bt15 per share this year and next for a yield of 6.1 per cent. A recommendation of LT-BUY is continued. The share price has been strong with an upside gain of just 9.8 per cent. In terms of strategy, investors are recommended to take profit as this share price is now near target price.