Traditional sector play – Cement and Aluminium

  • BUY Entry – SGD 0.028 Target –0.044 Stop Loss – 0.025
  • International Cement Group Ltd., together with its subsidiaries, primarily engages in the production, sale, and distribution of cement in Singapore, Malaysia, Australia, Tajikistan, Afghanistan, Uzbekistan, and internationally. It is also involved in the manufacture and marketing of aluminum extrusions, aluminum panels, and associated architectural aluminum products used for the construction industry.
  • The company is backed by strong financials and potential growth through acquisitions. Furthermore, being a traditional sector play, the company is relatively safer compared to other stocks amidst a potentially weaker market in the months ahead. 
  • Strong 1H21 financials. Revenue rose 35% YoY to S$85mn in 1H21, on the back of a 36% surge in revenue from the group’s cement segment. Net profit jumped by 66.5% to S$18.7mn, while PATMI more than doubled to S$13.0mn, mainly due to favourable foreign currency translation differences. Gross profit margin improved by 4ppts to 44%, contributed by the higher profit margin from Alacem Plant as it benefitted from lower costs in raw materials in Kazakhstan.
  • Inorganic growth via cement segment. The group’s main revenue driver is from the cement segment, which contributes approximately 94% to 95% of total revenue. On 9 April 2021, Sharcem LLP, a newly incorporated 60% subsidiary of the group, entered into a sales and purchase agreement with Kazakhccement LLP and Development Bank of Kazakhstan to acquire cement-related assets located in Jarminsky district in East Kazakhstan. The plant has an annual production capacity of 1mn metric tonnes and is expected to be completed by end September. Upon completion, the group’s combined annual cement production capacity in Central Asia will increase from 3mn metric tonnes to 4mn metric tonnes.
  • Aluminium segment. Even though aluminium is a small contributor to the group’s revenue, approximately making up only about 5% to 6%, there is potential for growth in the short to long-term as Singapore’s construction industry recovers from Covid-19. Singapore’s construction industry is forecasted to recover by 30% in 2021, after contracting by 35.9% in 2020. The industry is projected to continue to expand in 2022, registering real growth of 8.1%, and then expand by 3.3% over the remainder of the forecast period (2023-2025). Aluminium prices have rallied since mid-2020, with prices rising above US$2,740 a tonne in September, the highest since May 2011, which could also provide a catalyst to the group’s revenue from the aluminium segment.
ICG SP (Source: Bloomberg)