The Siam Cement
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Golden Year BUY
The Siam Cement Plc (SCC)
- 4Q14 profit grows 11%yoy to B8,856bn
SSC's 4Q14 net profit was reported at B8,856bn, growing 13%qoq and 11%yoy (much better than expected). Profit from the petrochemical business was remarkably strong since plastic sales and spreads of main petrochemical products (PE and PP, with Naphtha as raw material) made record high in many years and negated B2,960m stock loss. Meanwhile, profit from the construction material (cement) business fell by 23%yoy as a result of the slowing economy, profit from the paper business was low as a result of depreciation and interest expenses from the new paper factory opened in 4Q14, and profit from the investment business slipped slightly as dividend from TOYOTA dropped due to weak car sales. Overall, SCC's FY2014 net profit was B33,615m, falling 8%yoy. SCC will pay 2H14 dividend at B7/share; XD date is March 31, 2015.
- Strong profit in 1Q15 from core businesses and investment selling
SCC's profit is anticipated to be very strong in 1Q15. Though stock loss would increase by B1-1.5bn, plastic sales are expected to rise in high season (customers would increase product stock) and spreads of main petrochemical products (PE and PP, with Naphtha as raw material) have stayed above US$700/ton. B1.6bn extraordinary profit from selling of investment in Siam Michelin Group would be booked. Also, the construction material (cement) business usually enters a high season in the first quarter. Meanwhile, profit from the paper business is likely to continue dropping as a result of depreciation and interest expenses from the new paper factory opened in 4Q14. Overall, SCC's profit is likely to reach B10bn/quarter for the first time in 1Q14.
- Solid fundamental factor, steady growth, BUY
Every core businesses have been reviving, and the petrochemical business has entered an uptrend. Thus, SCC's earnings are anticipated to grow continuously for the next three years. We reiterate BUY. The fair value (DCF) is B530, with 15.86x P/E ratio.
