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AmBank Research keeps overweight on cement sector
Published on: Saturday, July 31, 2021
By: Bernama
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Kuala Lumpur: AmBank Research has maintained its “overweight” rating on the cement sector, as production restraints following the sector’s consolidation in 2019 resulted in a more rational competitive landscape in Peninsular Malaysia.In a note Friday, the research house said the consolidation helped to resolve some issues, namely supply, which should at least lift the implied value of clinker capacity.

“Beyond the pandemic and upon the recovery of the two key cement-consuming industries, namely property and construction, a demand-fuelled re-rating is imminent, although visibility is still lacking at this juncture,” it said.

Ambank Research also projects the average net cement selling price in Peninsular Malaysia to rise marginally by two per cent to RM240 per tonne in 2021, versus an estimated RM235 per tonne in 2020.

“We believe the conditions are conducive for further price hikes with the emergence of a price leader in the market following YTL Cement’s acquisition of Malayan Cement in 2019.

“Supply pressure is also expected to ease after both Malayan Cement and Cement Industries of Malaysia Bhd put one clinker plant offline, effectively removing two million tonnes off the annual clinker capacity, equivalent to eight per cent of industry’s clinker capacity from the market,” it said. 

With the price hikes, the research house expects players to return to the black in a more decisive manner in the coming quarters, noting that they have already broke even over the last three quarters after persistent losses in recent years.  



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