Expansion in the Federal Democratic Republic of Ethiopia (neutral)

  • West Cement announced to invest a total of US$170m to acquire stake in National Cement Share Company.
  • NCSC is primarily engaged in the production and sale of cement, limestone and related products.
  • As of end-June 2021, NCSC reported net assets at Birr 1,288m, or RMB182m @1ETB=0.1417RMB
  • West Cement would ultimate own 61.9% stake in NCSC upon completion of the transaction.
  • This is West Cement’s second overseas acquisition following its expansion to Mozambique, Africa in 2019.
  • Based on NCSC’s reported interim earnings, it would boost West Cement’s revenue and bottom line by about 10% and 4%, respectively.
  • West Cement’s net debt increased 50% to RMB3,365m during 1H2021. This expansion is expected to raise net gearing further to c.40% (previous: 30%).
  • West Cement is trading at 0.6x FY21F P/B, we have a HOLD rating and TP of HK$1.35.