Company Update � Lafarge Malaysia (SELL,
downgrade)
- A tough year
Weak domestic demand and oversupply of cement has
put pressure on average selling prices (ASPs). Coupled with disappointing
2H16 results, the year looks gloomy for Lafarge. Profit margin is squeezed by
higher depreciation expenses and integration costs that will likely persist
for the next two years with continuing losses from associates. Downgrade to
SELL from Hold with a lower DDM-based TP of RM7.00 given the earnings risks.
Cash balance of RM166m should support a DPS of 21 sen for 2017E, giving a net
yield of 2.6%.
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