Cement Stocks Comparison

Cement is one of the most attractive sectors, particularly for long-term player, because they have pretty good fundamental. There are only three cement companies that listed on the IDX, and three of them has quite decent performance. They are Semen Gresik (SMGR), Indocement (INTP), and Holcim Indonesia (SMCB). How did their performance on First Quarter 2010? And which company with good stock to collect? Let’s see then.

Based on its assets’ size, SMGR is the largest one with its assets of Rp13.8 trillion, followed by INTP with Rp13.6 trillion, and SMCB with Rp7.3 trillion. You maybe confused; isn’t SMCB that appears more popular than the other two? Why it has smaller asset? Indeed, SMCB ofter advertised their products in various media, including television, it is because their target market is invidual consumer; in other words, they retail their product. As for SMGR and INTP, they engaged in more major project such as building construction and public facilities. For example, SMGR supplies 300 tons of cement for Suramadu Bridge project in East Java. If later Selat Sunda Bridge project is deal, then the bidders for the supply of cement will not stray from Indocement or Semen Gresik.

That’s how when judge from the assets size. Judging by its market cap, INTP is bigger than SMGR, with Rp55.2 trillion of market cap, while SMGR only has Rp50.1 trillion. What about SMCB? It has Rp16.1 trillion of market cap. Does it mean that INTP’s performance is better than SMGR? If you look at the improvement on last First Quarter 2010, then the answer is yes. INTP recorded its improvement in sales up to 16.6%, operational profit of 31.5%, and net profit of 56.4%. On the other hand, SMGR only recorded its sales improvement of 0.6%, operational profit of 16.8%, and net profit of 17.8%. Nevertheless, SMGR is slightly better in terms of profitability ratio on First Quarter 2010, where SMGR recorded ROE of 29.4%, while INTP is only 27.4%. SMGR’s sales measure also greater than INTP. SMGR recorded its sales of Rp3.2 trillion, while INTP is only Rp2.6 trillion.

Then how about SMCB? This company has already started to show positive performance by recording its net profit of Rp205 billion on First Quarter 2010, after experiencing loss Rp77 billion on the same period of previous year. Past performance of SMCB is not as good as INTP and SMGR. That's why even though the size of its assets reached about half of the assets of INTP and SMGR, but its market cap is only a third of them. The company that previosly known as Semen Cibinong (hence the ticker is SCMB, not HLCM), began to show good performance after acquired by Holcim, one of the largest cement companies in the world from Swiss. If only SMCB is able to maintain their performance, maybe someday they can be as equal to INTP and SMGR.

Now, let us check their stock price.

Today’s stock price resulted in PER of: SMGR 15.6 times, INTP 17.6 times, and SMCB 19.4 times. Currently, SMGR’s stock is the most undervalue one between the three, because in the last two months, the investors are prefer to collect INTP and SMCB due to the performance improvement that is better than SMGR, so that the rise in stock price of SMGR is not as big as INTP and SMCB, particularly since mid last February. Since February, SMGR is constant and only up and down occasionally, while INTP and SMCB keep moving up. But the impact, when IHSG is beaten up by correction throughout the month of May, the price of SMCB and INTP is also affected and corrected, while SMGR is not affected.

That's why I would recommend SMGR for long term. In the near future, SMGR may has difficulties to climb up, but is very safe for the 6 to12-month choice, because the stock movement is very stable. But if you can stand to see red arrows in Yahoo Finance, INTP and SMCB can also be collected anyway, because their fundamentally are equally good, at least for now. You might want to consider collecting INTP for long term if in the second quarters later they were able to record an improvement performance that is equal to the present.

SMGR
Performance rating on First Quarter 2010: AAA

Stock rating on 8,450: A

INTP
Performance rating on First Quarter 2010: AAA

Stock rating on 15,000: A

SMCB
Performance rating on First Quarter 2010: A

Stock rating on 2,100: BBB

Original article was written on June 1^st, 2010