Hot Stock Lafarge gains 2% on cheaper coal, stronger earnings outlook

by **Cals** Thu 11 Sep 2014, 08:29

Hot Stock Lafarge gains 2% on cheaper coal, stronger earnings outlook

Business & Markets 2014

Written by Liew Jia Teng of theedgemalaysia.com

Wednesday, 10 September 2014 15:34

KUALA LUMPUR (Sept 10): Lafarge Malaysia Bhd gained 2.1% among top gainers as the cement producer is expected to benefit from falling coal prices.

By the close of the morning trading session today, Lafarge was traded at RM10.52, up 22 sen, with 261,600 shares done.

At 3.23pm, Lafarge, which became the bourse's third-largest gainer, remained at that price with 336,600 shares transacted.

The counter had traded between RM10.22 to RM10.54 so far today.

Maybank Investment Bank Bhd (Maybank IB) analyst Lee Yen Ling wrote in a research note today that Lafarge was set to benefit from falling coal prices, which would translate into lower production cost for Lafarge.

“While a portion of its coal is procured at an annual locked-in price, Lafarge Malaysia also procures coal at index-linked and spot prices, which have fallen 14% year-to-date,” Lee said.

The annual revision for Lafarge's coal locked-in price is due next month (October 2014).

Maybank IB also expects Lafarge to report stronger second half earnings. Lee said the forecast came on the back of higher average selling price (ASP) and volume for cement.

“Though the pace of ASP hike is slow, Ordinary Portland Cement ASP in Peninsular has risen 5% year-to-date,” said Lee.

She also highlighted that while Lafarge raised its list price by 9% in May 2014, its competitors were slow in raising their ASPs.

Maybank IB has maintained its "buy" call on Lafarge shares with a target price of RM10.75.

Lafarge's share price has risen 22% since Maybank IB upgraded the stock to a "buy" in February this year.