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Global Research
Result Update
Equity Oman
Cement Sector
29th May, 2012
Oman Cement Company (OCC)
1Q12 net profit increases by 23.9%YoY
OMR10bn development plan; 35.5% Investment Expenditure Increased
Clinker Capacity by 600,000tpa Fair value upgraded; Recommendation
maintained at HOLDModest 8.5% increase in top line in 1Q12Oman
Cement Company (OCC) recorded a 8.6% increase in top line to
OMR13.9mn asales volume reflected positively. This resulted in a
23.9% increase in profits reachinOMR5.1mn as compared to OMR4.1mn
registered in 1Q11. The increase has mirrorestrongly in margins.
Gross margins increased to 40.1% and net margins up by 450bps
t36.8% during the quarter. The increase can be attributed to the
inauguration of its new
clinker line which increased the capacity to 2.4mtpa. In
addition to higher production ansales volume.
New Kiln leads to higher production and salesOman Cement managed
to roll out 543,544tons of cement during 1Q12, up 10.7% acompared
to the previous period, the increase is associated to a new Kiln
commissionein 2011, a new line of 4,000tpd of clinker has been
completed. Clinker production on thother hand increased 94% and
reach 538,295tons, of which 60% of it is from the new KilnIn terms
of sales, OCC sold 558,495tons of cement during 1Q12 as compared
t490,865tons in 1Q11, a 13.8% increase. OCC signed a contract to
increase capacity oKiln-1 and is expected to commission it in
1Q13.
Stabilization in PricesPrices of cement in Oman have witnessed
stability after recording continuous declinsince 2009 where prices
averaged around USD82.5/ton. Since 1Q12 Omani cement prichave
averaged around USD65/ton, a strong sign of stabilization. We
expect cement priceto continue at their current levels and start to
increase from 2013 onwards.
Huge Development PlanThe Omani government ratified the new
budget for 2012 with a historical OMR10.0bn iexpenditures, 35.5% of
the expenditures is targeted to investments. According to
thMinistry of Economy, the country is allocating around OMR2.0bn to
build new projectincluding roads, construction of 29 schools, 5 new
hospitals, establishment of fishinharbors and centralized
markets.
The development plan will help OCC tremendously as it will help
keep up local cemendemand. In addition risks arising from the
supply of cement from neighboring countrieincluding UAE will
decrease due to the situation in UAE is turning around as there
pickup in demand which has given rise to increase in price for the
first time since 2009.
Interim Results
(OMR mn) 1Q11 1Q12 Cha
Sales Revenue 12.9 14.0 8Cost of Sales 8.1 8.4 3
Gross Profit 4.7 5.6 18
Operating Profit 4.0 4.7 16
Net Profit 4.2 5.1 23
Gross Margins (%) 36.9% 40.1%
Operating Margins (%) 31.1% 33.5%
Net Margins (%) 32.3% 36.8%
Market Data
Bloomberg Code: OCOI OM
Reuters Code: OCCO.OM
CMP (29t
May 2012): OMR0.676
O/S (mn) 330.8
Market Cap (OMR mn): 223.7
Market Cap (USD mn): 581.7
P/E 2012e (x): 11.2
P/Bv 2012e (x): 1.5
Price Performance 1-Yr
High (OMR): 0.69Low (OMR): 0.42
Average Volume: (000) 143.4
1m 3m 12mAbsolute (%) 8.1 32.0 20.1Relative (%) 10.5 33.8
24.3
Price Volume Performance
Faisal Hasan, CFAHead of [email protected].: (965)
2295-1270
Turki O. AlYaqout
Financial [email protected].: (965) 2295-1295
Global Investment Housewww.globalinv.net
HOLDTarget Price
OMR0.698
0.40
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0
200
400
600
800
1,000
1,200
1,400
1,600
23-May-11
23-Jun-11
23-Jul-11
23-Aug-11
23-Sep-11
23-Oct-11
23-Nov-11
23-Dec-11
23-Jan-12
23-Feb-12
23-Mar-12
23-Apr-12
23-May-12
Volume (000) OCC (OMR) - RHS
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7/29/2019 OCC Update 052012
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Global Research Oman Oman Cement Company (OCC)
May 2012 2
Healthy financial baseOCC managed to witness a 2.6% increase in
equity for 1Q12 to reach OMR143.6mn, in addition to an healthy 3.8%
increase inassets. Oman Cement debt/equity ratio is currently at
0.09x in 1Q12 and is expected to decrease to 0.05x in 2012. The
companyhas a healthy current and quick ratio of 3.1x and 2.1x
respectively.
Valuation updateWe have upgraded our fair value to
OMR0.698/share after incorporating improved cement demand forecast
for 2012-15 in ourmodel. Despite upgrading our fair value the
recommendation has not changed due to 32.0% increase in share price
in the last 3months. Thus we maintain HOLD recommendation on the
stock.
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Global Research Oman Oman Cement Company (OCC)
May - 2012 3
inancial Statement(OMR mn) 2009 2010 2011 2012e 2013e 2014e
2015e
Net Sales Revenue 68.3 51.9 47.9 57.8 61.8 65.4 69.2
Cost of Sales (42.0) (29.2) (31.1) (34.2) (36.3) (38.5)
(40.7)
Gross Profit 26.2 22.7 16.8 23.6 25.5 27.0 28.5
General & Administrative Expense (2.5) (5.2) (3.4) (3.8)
(4.0) (4.3) (4.5)
Operating Profit 23.7 17.5 13.4 19.8 21.5 22.7 24.0
Other Income 3.6 10.6 1.4 2.3 2.1 1.9 1.7
Share of Result of Associates 0.0 0.1 0.1 0.1 0.1 0.2 0.2
Net Finance Income (0.0) (0.0) (0.3) (0.1) (0.1) (0.1) (0.1)
Profit Before Taxation 27.4 28.2 14.5 22.2 23.6 24.7 25.8
Taxation (3.1) (3.2) (1.7) (2.2) (2.4) (2.5) (2.6)
Net Profit 24.2 25.0 12.8 19.9 21.3 22.2 23.2
Cash and Bank Balance 2.3 3.2 3.0 3.1 5.8 8.4 8.3
Receivables and Prepayments 5.1 5.6 8.9 7.1 7.6 8.1 10.4
Inventories 7.7 9.4 12.6 8.4 8.9 9.5 11.2
Investments 7.8 6.4 6.3 6.6 6.6 6.7 6.7
Other Ass ets 2.1 16.8 12.5 12.5 12.5 12.5 12.5
Long-term Deposits 22.4 17.8 11.3 11.9 11.3 10.7 10.2
Investments in Associates 0.6 0.7 0.8 0.8 0.8 0.8 0.9
Investments Available-for-Sale 13.6 12.8 11.0 11.2 11.5 11.7
11.9Net Fixed Assets 91.8 99.5 107.8 109.6 108.2 107.7 107.2
Total Assets 153.5 172.2 174.3 171.3 173.3 176.2 179.4
Loans 4.1 7.4 8.0 7.6 7.2 6.9 6.5
Payables 4.9 7.7 11.4 9.8 10.4 12.6 13.1
Others 8.6 8.7 6.5 5.1 5.3 5.4 8.2
Paid -up Capital 33.1 33.1 33.1 33.1 33.1 33.1 33.1
Reserves 35.9 35.7 35.0 35.2 35.4 35.6 35.9
Share Premium 6.7 6.7 6.7 6.7 6.7 6.7 6.7
Revaluation Surplus 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Retained Earnings 60.2 73.0 73.6 73.7 75.1 75.8 75.8
Total Shareholders Equity 135.9 148.5 148.4 148.7 150.3 151.2
151.6
Total Equity & Liability 153.5 172.2 174.3 171.3 173.3 176.2
179.4
Cash Flow from Operating Activities 32.7 27.6 8.4 27.3 25.4 28.0
26.9
Cas h Flow from Inves ting Activities (30.8) (17.9) 3.0 (6.8)
(2.4) (3.4) (3.4)
Cash Flow from Financing Activities (4.1) (8.9) (11.6) (20.4)
(20.3) (22.0) (23.6)
Net Change in Cash (2.3) 0.8 (0.2) 0.1 2.7 2.6 (0.1)
Net Cash at End 2.4 3.2 3.0 3.1 5.8 8.4 8.3
Current Ratio (x) 2.9 3.2 2.9 2.9 3.0 2.9 3.1
Quick Ratio (x) 2.0 2.5 2.0 2.2 2.4 2.2 2.4
Gross Profit Margin (%) 38.4% 43.8% 35.1% 40.8% 41.3% 41.2%
41.2%
Operating Margin (%) 34.8% 33.7% 28.0% 34.3% 34.8% 34.7%
34.7%
Net Profit Margin (%) 35.5% 48.3% 26.7% 34.5% 34.4% 33.9%
33.6%
Return on Average Assets (%) 16.9% 15.4% 7.4% 11.5% 12.3% 12.7%
13.1%
Return on Average Equity (%) 19.1% 17.6% 8.6% 13.4% 14.2% 14.7%
15.3%
Debt / Equity (x) 0.03 0.05 0.05 0.05 0.05 0.05 0.04
Cash Return On Capital Invested (%) 22.5% 21.7% 12.6% 17.8%
18.7% 19.3% 20.1%EV/Ton (OMR) 133.3 83.1 83.4 87.8 86.6 85.4
85.3
Dividend Yield (%) 2.9% 5.8% 5.8% 8.9% 8.9% 9.6% 10.4%
EV/Revenues (x) 3.65 4.16 4.52 3.95 3.64 3.39 3.21
EV/EBITDA (x) 8.14 6.71 11.56 8.60 8.00 7.60 7.28
Book Value Per Share (OMR) 0.41 0.45 0.45 0.45 0.45 0.46
0.46
Market Price (OMR) * 0.75 0.64 0.64 0.68 0.68 0.68 0.68
Market Capitalization (OMR mn) 247.5 211.8 211.8 223.7 223.7
223.7 223.7
EPS (OMR) 0.07 0.08 0.04 0.06 0.06 0.07 0.07
P/E Ratio (x) 10.21 8.46 16.54 11.21 10.52 10.08 9.63
P/BV Ratio (x) 1.82 1.43 1.43 1.50 1.49 1.48 1.48
Source: Company Reports & Global Research
* Market price for 2012 and subsequent years as per closing
price on MSM on May 28th, 2012
Profit&Loss
Statement
BalanceSheet
CashFlow
RatioAna
lysis
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Global Research Oman Oman Cement Company (OCC)
May - 2012 4
Disclosure
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or may not apply to all our researches. Only the
relevantdisclosures which apply to this particular research has
been mentioned in the table below under the heading of
disclosure.
Disclosure Checklist
Recommendation
Bloomberg
Ticker
Reuters
Ticker Price DisclosureCompanyOman Cement Company BUY OCOI OM
OCCO.OM OMR0.676 1,10
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any compensation from the company or anyone else for thepreparation
of this report.
2. The company being researched holds more than 5% stake in
Global Investment House.3. Global Investment House makes a market
in securities issued by this company.4. Global Investment House
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10. Please see special footnote below for other relevant
disclosures.
Global Research: Equity Ratings Definitions
Global Rating Definition
STRONG BUY Fair value of the stock is >20% from the current
market price
BUY Fair value of the stock is between +10% and +20% from the
current market price
HOLD Fair value of the stock is between +10% and -10% from the
current market price
SELL Fair value of the stock is < -10% from the current
market price
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