SCCC: 4QFY17 net profit off 53% y-y February 13, 2018

  • 4QFY17 net profit off 53% y‐y: SCCC put in a weak performance in 4QFY17 as net profit tumbled 53% y‐y largely because of a dramatic drop in exceptional gains. In this period, SCCC recorded a FX gain of only Bt1.8mn against the Bt342mn divestment gain it earned in the like year‐ago period. Stripping out ex‐items, its core profit still declined 22% y‐y as sustained high levels of operating expenses took a bite out of margins though sales jumped 18% y‐y on the back of rising sales volumes following the acquisition of Vietnamese cement manufacturer Holcim. Operating expenses especially interest expenses shot up due chiefly to the increased debt load to fund the above acquisition deal. Despite a weaker profit performance, SCCC declared a final dividend of another Bt4/share from its 2HFY17 operations, taking the full‐year dividend to as high as Bt10/share after it paid an interim dividend of Bt6/share in 1HFY17. In our view, the dividend was pretty high compared to its full‐year EPS of Bt6.59/share. The dividend would be paid out of retained profits. Nonetheless, given its current profitability levels and financial position, it seems to us that huge dividend payout may not be good for SCCC in terms of sufficient financial capacity to fund its future investment plans.
  • ‘NEUTRAL’ rating with FY18 target price of Bt260/share: On a normalized basis, we think the room for profit growth would continue to be limited by high coal costs in FY18 though revenue is set to rise on the back of the full‐year contribution of its recently acquired Vietnamese cement maker. However, due to the likely absence of restructuring charges of between Bt600mn‐Bt700mn as recorded in FY17, its net profit is expected to bounce back to positive growth in FY18. We estimate SCCC will see its net profit rise 50% y‐y to Bt2.7bn in FY18. Despite the recent sharp retreat in share prices, the upside to our FY18 profit target of Bt260/share remains limited. On balance, we rate SCCC shares a ‘NEUTRAL.’

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