Siam Cement Group

Siam Cement Group (SCC) is Thailand’s largest cement producer, with capacity of 24.2mt. The company’s cement business has had strong performance in 2012 driven by the government’s massive infrastructure spending coupled with a pent up in demand for new modern trade centres and new housing. However, SCC underperformed Siam City Cement (SCCC, not rated), Thailand’s second-largest cement producer, by 25% despite SCC’s superior EPS growth in its cement business on our estimates (34% y-y vs SCCC’s 16% on Bloomberg estimates). We believe the share price performance was hampered by the poor performance of SCC’s petrochemical business in 2012. Given an improving petrochemical cycle expected in 2013/14F and estimated continued growth of 22% in the cement business over the same period, we believe SCC’s share price should re-rate toward that of SCCC. Based on consensus estimates, SCCC is trading at FY13F PE of 21x and PBV of 5x (vs SCC’s FY13F P/E of 18x and PBV of 3x). SCC’s cement and chemical business accounts for ~60% of the group’s EBITDA in FY08A-14F on our estimates.