Malayan Cement is rock solid

The counter has ‘Buy’ calls by all the 6 analysts tracked by Bloomberg, with a 52-week consensus TP of RM6.39 

MALAYAN Cement Bhd, the largest cement manufacturer in Malaysia, is well-liked by the equity analysts following the stock. 

The counter has ‘Buy’ calls by all the six analysts tracked by Bloomberg, with a 52-week consensus target price (TP) of RM6.39. 

On May 23, it closed at RM5.45, the highest in the last one year. 

In its latest report, MIDF Amanah Investment Bank Bhd (MIDF Research) gave the counter a considerable bump-up in its TP, raising it to RM6.03 from RM5.33. 

“We expect Malayan Cement will be among the main direct beneficiaries of the pickup in the construction sector, which is expected to be driven by a strong pipeline of jobs, both civil and private,” it said. 

Apart from the growth in private projects such as data centres, it said warehouses and semiconductor factories, civil projects that were expected to kick off by the calendar year 2024 include the Penang Light Rail Transit (LRT) and the KL Sentral station redevelopment.

It noted that ongoing infrastructure projects that will continue to drive cement demand are the likes of the East Coast Rail 

Link (ECRL), rapid transit link and LRT3. Commenting on its target price, MIDF Research had taken into consideration of its large cement market share of about 60% in the peninsula.

In its latest financial update, Malayan Cement posted a net profit of RM318.5 million for the first nine months up to March 2024, up four time from the same period last year. It was on a revenue of RM3.4 billion, up from RM2.75 billion. 

Commenting in its prospects, the company said the cement demand is expected to remain satisfactory primarily driven by civil and non-residential ventures including infrastructure, logistics facilities, data centres and factories. 

It said Malaysia’s long-term for housing and infrastructure, due to its young population and high urbanisation rate, would also continue to sustain cement demand. 

In a separate report, Hong Leong Investment Bank Bhd (HLIB Research) raised the counter’s TP to RM6.42. 

“Going forward, profitability is expected to sustain on the back of still manageable coal cost dynamics while cement ASPs (average selling prices) remain healthy,” it said. 

Moving forward, HLIB Research said the company’s profitability is expected to sustain in the near term on the back of still manageable coal cost dynamics, while cement ASPs remain healthy at RM380/t. 

It also noted that Indonesia’s approved coal production quota for 2024 points towards continuing easy conditions (+29.9% versus its initial 2024 target; +19.6% YoY) as projected supply continues to outstrip demand. 

“Prices are not reflective of Indonesia’s intended supply growth as production year-to-date has lagged at 292m tonnes or 32% of target. Adherence to these targets could put a lid on coal ASPs. 

“On the demand side, we expect gradual uptick in volumes from ongoing construction projects, notably ECRL while pipeline of mega projects in Malaysia and Singapore such as Penang LRT, MRT3, high-speed rail, Changi T5 and Tuas Port firms up demand prospects longer term,” it said. 

Going forward, it said Malayan Cement is on track to register profitability not seen since the 2012-2014 period. 

“In our view, this better reflects its strong earnings performance and upcoming pipeline of infrastructure rollouts,” it said. 

In February 2024, RAM Ratings Bhd revised from stable to positive the outlook on Malayan Cement’s RM5 billion Sukuk Murabahah Programme (2022/2052) long-term and short-term issue ratings of AA3 and P1. 

It said the positive outlook was supported by Malayan Cement’s dominant business position and improved financial performance following the strategic consolidation of YTL Cement Bhd’s (the group) domestic cement and ready-mix concrete businesses under the company. 

Under RAM’s methodology for assessing parent-subsidiary relationships, it said Malayan Cement was viewed to have a close relationship with its ultimate parent, YTL Corp Bhd. This view was underpinned by the integration of the company’s operations and its significant contribution to YTL Cement’s revenue and profits. 

YTL Cement, in turn, constitutes almost the entirety of YTL Corp’s cement and building materials Industry segment, the second-largest after the utilities segment. 

Given YTL Corp’s control over the strategic direction of the entire cement business, it said the issue rating benefits from an uplift from parental support. TMR 


  • This article first appeared in The Malaysian Reserve weekly print edition