Analysts bullish about shares of cement producers
Analysts bullish about shares of cement producers
JAKARTA (JP): Analysts estimated yesterday that the shares of cement manufacturers listed on the Jakarta Stock Exchange (JSX) will exceed the average performance of other shares this year.
The research director of PT HG Asia Indonesia, Jonathan Harris, told The Jakarta Post yesterday that cement manufacturers will enjoy a steady increase in profits until 1998 because of the current under supply situation.
Jonathan said that cement producers predicted a 10 percent increase in the retail reference price of cement by June this year. The price of cement in Indonesia is set by the government for each provice. The national average is average retail reference price.
"HG Asia expects the earnings per share of PT Indocement to grow by 21 percent, PT Semen Cibinong by 23 percent and PT Semen Gresik by 60 percent. So, fundamentally cement shares should continue to outperform the market this year," said Jonathan.
He added that the average price earning ratio for cement shares is predicted at 16.5 times that of last year.
An American-born analyst at Bahana Securities, who asked not to be named, told the Post yesterday that the earnings per share of cement manufacturers is likely to grow by 27 percent this year, as compared to an average growth of 24 percent for all shares listed on JSX.
On Dec. 28, 1995, the last trading day of last year, Indocement shares closed at Rp 7,675 (US$3,3), Semen Cibinong at Rp 4,275 and Semen Gresik at Rp 6,700.
Last week, the Indocement and Semen Gresik shares closed 17.2 percent and 23 percent higher at Rp 9,000 and Rp 7,900 respectively.
The analyst disagreed with the notion that the price rises were being pushed up by rumors that the cement manufacturers had asked the government to raise the local reference cement prices early this year.
"It could be a speculative buying action, but I would say that the fundamentals of the cement industry in Indonesia are very positive compared with other countries," the analyst said.
The analyst said that the earnings per share of Indocement would grow by 15 percent this year, while that of Semen Gresik might grow by 83 percent this year and about 43 percent in 1997.
Semen Gresik
"We estimate Semen Gresik to have booked a total of Rp 157 billion in net profit last year. The amount is likely to increase to an estimate of Rp 287 billion this year and Rp 410 billion next year," he said.
The dramatic increase in Semen Gresik's profits will be generated by its acquisition of state-owned cement plants in Padang, West Sumatra, and in Ujungpandang, South Sulawesi, which catapulted its total capacity to 10.6 million tons a year or 40 percent of the national capacity.
Therefore, the analyst added, the earning per share of Semen Gresik, which was estimated at Rp 381 last year, will increase to Rp 484 this year and Rp 691 next year.
"Our estimate assumes that the local reference prices of cement will increase by only 8 percent this year, as compared to 30 percent last year," he said.
He reckoned that the Indonesian government has become more careful and prudent in setting the new reference prices of cement as they might increase inflationary pressures.
He said although the new reference prices might be higher than Bahana's estimate, the impact would not be far different from his predictions because the construction industry would not be as strong as last year.
Bahana predicted that the price earning ratio of Semen Gresik will rise 16.5 times this year and 11.6 times next year and Indocement 19.2 times this year and 16.7 times next year.
An analyst from Sigma Batara, Indyarta Daminanus, however, told the Post that the prices of cement shares were already overvalued.
"We predict the average price earning ratio to decline to 20 times from an estimate of 22 times last year, with an average earning per share growth of 22.7 percent," Damianus said.
Sigma Batara estimated that Indocement booked Rp 473.8 billion in profits last year, Semen Cibinong Rp 91.3 billion, and Semen Gresik Rp 148.1 billion.
Indocement yesterday announced that it booked Rp 475.9 billion in net income for all last year. It surpassed Sigma Batara's estimation of Rp 473.8 billion.
HG Asia estimated that Semen Cibinong's net profit will reach Rp 125 billion this year and about Rp 174 billion next year. (08)