Opportunities on Crises (PSE: LRI, PSE: HLCM)

Zamboanga Crisis, earthquake, and super typhoon, these crises present an opportunity for the construction industry. There are many construction companies in the Philippines but looking at the cement industry, our selection will be narrowed down significantly to just only three selections: CEMEX Philippines, Holcim Philippines (PSE: HLCM), and Lafarge Republic, Inc. (PSE: LRI).

CEMEX Philippines is not a publicly listed company thus we are to compare LRI and HLCM.

LRI which estimates its market share at 33% [1] and HLCM both foresee a favorable demand for cement products in the future as shown in their planned expansions below:

LRI1

  1. Re-commissioning of Danao Plant in Cebu expected to contribute in the capacity in the second half of 2013. [2]
  2. Revival of grinding plant in Batangas expected to contribute in the capacity by September of 2013. [3]
  3. P2 billion project for a new grinding mill in Teresa Plant expected to contribute in the production capacity in January 2015. [4]
  4. Construction of a P20 billion cement plant in Norzagaray, Bulacan (for final approval of the board) and expected to contribute in the capacity by 2017. [3]

Using simple metrics, below is the comparison between LRI and HLCM:

LRI2

Calculation of e2013 PE ratios:

LRI3

As a way in participating in cement industry, LRI appears to be an attractive investment in the next 2-3 years.

 

Source:

  1. Lafarge 2012 Annual Report, p. 34, http://www.lafarge.com/04032013-press_publication-2012_annual_report-uk.pdf
  2. Re-opening of Danao Facility in Cebu, http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2407_LRI.pdf
  3. Clarification of news article: “Seasonal boost, lower cost buoy
    Holcim’s bottom line”, http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-6551_HLCM.pdf
  4. Clarification of news article: “Lafarge budgets P4.5B expenditure, sees growth”, http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-4456_LRI.pdf

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell. Read more in the ABOUT page.

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2 thoughts on “Opportunities on Crises (PSE: LRI, PSE: HLCM)

  1. Finally, I was waiting for your comment in the cement industry. This is a really great for every investor. I’m actually accumulating LRI since aside from the 5% dividend income, since it’s a no brainer that demand of cement will continutally rise due to the recent events in our country.

    Thank you again , Bro Renz , I believe that everyone should have this stock in his portfolio.

    Reply

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