TASEK (4448) - Tasek Corporation - Final bumper year for dividends
Target RM16.46 (Stock Rating: HOLD)
Tasek's FY14 core net profit was broadly in line and came in at 3% above our full-year forecast. Growth in revenue with a flattish EBITDA margin was largely expected given the pick-up in domestic cement market but tempered by rising costs and low net selling prices. The main takeaway was the surprise 80 sen/share final dividend which brought the full-year payout to RM1.70/share. But this is not sustainable given the full utilisation of section 108 tax credits. We retain our EPS forecasts and target price, pegged to an unchanged CY15 P/BV multiple of 1.89x (10% discount to Lafarge's 1-year P/BV average). We keep our Hold call in view of the decent dividend yield of 5%. Switch to contractors, which are the early beneficiaries of job rollouts.
FY14 results in line
FY14 core net profit was broadly in line, as it was 3% above our full-year number. Revenue growth was healthy, backed by improved domestic cement demand that is driven by the property segment. EBITDA margin was flattish yoy at 23%, largely within expectations given the volatility of net selling prices (higher rebates) as a result of the still-competitive environment. We gathered that pricing volatility was relatively more intense in 4Q14, in line with sector activities. The pleasant surprise was the final DPS of 80 sen/share, bringing the total full-year payout to RM1.70/share, and higher than our full-year forecast of 90 sen. Tasek has fully utilised its section 108 tax credits for FY14.
Still volatile selling prices ahead
We expect local cement producers to continue to benefit from the widely expected 3-4% domestic cement demand growth in 2015 (est. 5-6% growth in 2014). But competitive pressures are likely to sustain, driven by the ramp-up in launches by selected property developers ahead of the implementation of the GST in Apr 15. This situation is likely to further erode the pricing power of relatively smaller players like Tasek, which, despite announcing c.9% increase in list prices last year, is still experiencing margin pressures.
Manageable cost, sustainable 5% dividend yield
The recent 5.8% average reduction (rebates) in electricity tariffs till Oct 15 serves as a temporary reprieve for cement manufacturers, but still insufficient to offset the average 16.9% increase in tariff last year. We estimate that energy makes up 30-40% of production cost.
Source: CIMB Daybreak - 18 February 2015
Target RM16.46 (Stock Rating: HOLD)
Tasek's FY14 core net profit was broadly in line and came in at 3% above our full-year forecast. Growth in revenue with a flattish EBITDA margin was largely expected given the pick-up in domestic cement market but tempered by rising costs and low net selling prices. The main takeaway was the surprise 80 sen/share final dividend which brought the full-year payout to RM1.70/share. But this is not sustainable given the full utilisation of section 108 tax credits. We retain our EPS forecasts and target price, pegged to an unchanged CY15 P/BV multiple of 1.89x (10% discount to Lafarge's 1-year P/BV average). We keep our Hold call in view of the decent dividend yield of 5%. Switch to contractors, which are the early beneficiaries of job rollouts.
FY14 results in line
FY14 core net profit was broadly in line, as it was 3% above our full-year number. Revenue growth was healthy, backed by improved domestic cement demand that is driven by the property segment. EBITDA margin was flattish yoy at 23%, largely within expectations given the volatility of net selling prices (higher rebates) as a result of the still-competitive environment. We gathered that pricing volatility was relatively more intense in 4Q14, in line with sector activities. The pleasant surprise was the final DPS of 80 sen/share, bringing the total full-year payout to RM1.70/share, and higher than our full-year forecast of 90 sen. Tasek has fully utilised its section 108 tax credits for FY14.
Still volatile selling prices ahead
We expect local cement producers to continue to benefit from the widely expected 3-4% domestic cement demand growth in 2015 (est. 5-6% growth in 2014). But competitive pressures are likely to sustain, driven by the ramp-up in launches by selected property developers ahead of the implementation of the GST in Apr 15. This situation is likely to further erode the pricing power of relatively smaller players like Tasek, which, despite announcing c.9% increase in list prices last year, is still experiencing margin pressures.
Manageable cost, sustainable 5% dividend yield
The recent 5.8% average reduction (rebates) in electricity tariffs till Oct 15 serves as a temporary reprieve for cement manufacturers, but still insufficient to offset the average 16.9% increase in tariff last year. We estimate that energy makes up 30-40% of production cost.
Source: CIMB Daybreak - 18 February 2015
