Friday, August 08, 2008

Lafarge to pay RM700m in dividends? A worth while stock?

By Biz Times
Higher cash dividends, special cash dividends and capital repayment by the cement producer cannot be ruled out over the next 12 months, say analysts
LAFARGE Malayan Cement Bhd (LMC), the country's largest cement producer, may pay up to RM700 million in special dividends within the next 12 months, analysts say.

"We have not factored any special cash distribution in our model, but do not completely rule out the exercise over the next 12 months," Nik-hadi Nik-mahmood, an equity analyst at Deutsche Bank, wrote in a report this week.

Such a move would be a boon to shareholders as LMC returned some RM125 million through dividend payments in its last financial year, including a 20-sen regular cash dividend paid in May.

The total payout came to about 43 per cent of LMC's net profit of RM287.82 million in 2007, a tad higher than its five-year dividend growth of 31.95 per cent.

UBS Warburg, which has a RM5 price target on LMC, expects the share price to be re-rated once there is further clarity of its capital management initiatives.
These would include higher cash dividends, special cash dividends and capital repayment.
LMC, some 62 per cent owned by the world's biggest cement producer Lafarge SA, is banking on a share placement exercise to raise fresh capital.

As at December 31 2007, LMC had about RM115 million in cash.
If the company does take the capital repayment route, it will be following in the footsteps of several foreign-controlled public-listed companies in Malaysia, such as Telenor ASA with DiGi.Com Bhd and Jardine Cycle & Carriage Ltd with Cycle & Carriage Bintang Bhd.
LMC has until the end of the year to comply with a rule by the Foreign Investment Committee whereby it will carry out a special issue of 161.88 million new shares to selected Bumiputera investors.

Analysts said the exercise could raise as much as RM800 million, with some RM100 million to be used for expansion, leaving the door open for a special dividend payment in the future.
"There is scope for a cash repayment of up to 82 sen a share. The Bumiputera shareholding spread requirement deadline is the catalyst for the exercise. The management plans to maximise dividend payments after meeting its capex (capital expenditure) and working capital requirements," Nik-hadi wrote in his report.

LMC's current dividend yield and price-to-earnings (PER) ratio are also pull factors, Kim Eng Research contends.

"Valuations are very decent and dividend yield is an attractive six per cent. It is trading at a PER ratio of 10 times, which by historical standards is low," Kim Eng's Yew Chee Yoon wrote in a report last week.