CGSI Research expects the company to benefit from the completion of YTL Cement Bhd‘s acquisition of an 81% stake in NSL Ltd.
PETALING JAYA: Malayan Cement Bhd
is likely to register higher volume growth and better concrete revenue from higher demand for ready-mixed concrete.
CGSI International Research (CGSI Research) believed other potential government infrastructure projects that could provide further impetus for cement demand next year include the Johor Automated Rapid Transit, Light Rail Transit (LRT) and the Kuala Lumpur-Singapore Highspeed Rail.
It pointed out that while the East Coast Rail Link (ECRL) project is at its tail end, the Penang LRT should fill the gap.
“Malayan Cement expects its financial year (FY25) cement volume to be buoyed by demand for data centres, semiconductor factories and industrial warehouses, as the supply to the ECRL will end by 2024,” the research house added.
CGSI Research viewed that the cement industry remains in a sweet spot with average selling prices firm at RM410 per tonne (before rebates) and unaffected by the government’s plan to implement carbon tax by 2026 as announced in Budget 2025.On the cost side, it expects Malayan Cement to benefit from a stronger ringgit versus the US dollar, as 40% of its cost of goods sold is coal where prices are denominated in dollars.
The research house also expects the company to benefit from the completion of YTL Cement Bhd‘s acquisition of an 81% stake in NSL Ltd.
NSL owns Eastern Pretech Pte Ltd, which provides industrialised building system solutions.
CGSI Research maintained its “add” call with a higher target price to RM7.
Meanwhile, MIDF Research expects the private sector to continue driving demand.
“We expect FY25 to continue being driven by the private sector, with projects such as warehouses, data centres and residential projects.
“On the civil side, we expect projects such as the Penang LRT, airport expansions and other projects under Budget 2024 such as roads, schools and hospitals to drive demand,” it said.
The research house has maintained its “buy” recommendation for Malayan Cement, which is among its top picks for the construction sector.
This was due to the company being the main direct beneficiary of the pickup in the sector, which was expected to be driven by a strong pipeline of jobs, civil and private.
MIDF Research has maintained its earnings forecast on the back of expectations that a stronger first half financial year 2025 will make up for a slightly weaker third quarter calendar year 2025 (January to March) which is usually a slower quarter due to festivities and February being a shorter month.
It has upgraded its target price to RM6.81 from RM6.60.
