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|Construction & Materials
Real-Time news about West China (London Stock Exchange): 0 recent articles
|fiftha: A well-reasoned post Pro, and another example of your valuable momentum approach.
The degree of flipping by local investors will very much depend on the quality of the book, as I know you are aware, and from what I've been told the quality so far is extremely high, reflecting WCC's unique pure-play status. I agree that there will be a good deal of London money looking to exit, but then quite a lot has already gone and I know that agile HK investors have been buying in London.
WCC has wonderful visibility of earnings, and this certainty means it deserves a much higher weighting in my portfolio than E&P stocks - mine is BLVN but I'm not going mad despite all the puff from the company and analysts. I can't say what the share price will do in the short term - I'm not clever enough to do that, but in the long term the growth will come through and be recognised in the price.
Thanks for the RCG tip - I see it's had a dreadful year so far in 2010, more or less halving, so perhaps it's worth a look, but that sort of share price performance indicates a less solid business than WCC, don't you think?|
|celeritas: China's NDRC orders coal price-freeze: BofA/Merrill Lynch
London (Platts)--28Jun2010/722 am EDT/1122 GMT
China's National Development and Reform Commission Friday is reported as
having issued a price-freeze directive to its domestic miners including
Shenhua and China coal, according to a statement from the Bank of America
The investment bank said the NDRC issued the release on its website.
"In order to tame the country's rising inflation, the NDRC ordered the
coal companies to honor 2010 contract price, any price increase in the past
should be refunded to downstream clients by end of June," said the note.
"State-owned coal enterprises must lead the way in stabilizing the coal
market and must not increase coal prices," it continued.
It noted that the NDRC had held meetings with the country's major coal
companies "in Shanxi and Henan and ordered them to hold off on any coal price
The investment bank said it considers the news as negative "for all coal
companies as contract players must stop monthly contract pricing and move back
to annual pricing and keep their contract price flat, while spot players could
see further price capping policy in the spot market should the spot price
continues to move up in summer."
The price-cap move, according to the bank, was "positive for downstream
players such as cement companies, as this will surely ease investors concerns
on rising coal cost." It noted a 20% collapse in Yanzhou's share price when
prices were capped in 2008. "That said, we note that this time coal companies'
share prices have already come down in the past two months whereas in 2008
coal companies' share prices were at their peak," said the bank.
Investors could see Yuan 800/mt as a cap for coal prices, leading to
long-term de-rating, it added.
--James O'Connell, firstname.lastname@example.org
|culchi: This update from NCB this morning.
West China Cement GBp 487.50 Scope for Valuation to Move Back in Line with Peers
We have published a company update report today highlighting that recent infrastructure contract wins in Shaanxi province
provide evidence of ongoing market demand in the province from continued government investment in rural China. Recently
announced planned capacity increases do not prompt any changes in financial estimates at this point and we view the
fundamentals of the Group as remaining intact. The deferral of the Hong Kong listing for the shares is a disappointment and
has weighed on the share price recently. With scope for WCC's valuation to move back into line with its Asian peer group
we maintain our Buy recommendation and 745p target price.
Xi'an-Ankang railway contract win: Indicative of the continuing infrastructure development in Shaanxi province, and its
impact on cement demand, WCC has recently won contracts for seven out of the ten sections of the Xi'an-Ankang railway
line. The railway line runs through the Xi'an, Shanglou and Ankang regions of the province, where the Group's Lantian,
Zhen'an and Ankang plants are located. Estimated cement demand for the seven sections secured by WCC is 1.35m
Capacity expansion plans reflected in our estimates: Accompanying the release of preliminary results in March, WCC
outlined plans to increase capacity through the construction of two additional 1.1m tonne p.a. plants this year, taking Group
capacity to 11.8m tonnes. WCC is constructing Pucheng Line 2, with capacity of 1.1m tonnes p.a. and will raise total
capacity in Pucheng to 2.5m tonnes. The plant is expected to be completed by the second half of 2010. In conjunction,
WCC plans to construct the 1.1m tonnes p.a. Xixiang plant, in the Hanzhong region. This is planned for completion during
the first half of 2011. Our model had assumed capacity expansion in line with that announced along with preliminary results,
therefore we make no significant changes to estimates at this point.
Hong Kong IPO deferred until H2 2010: Management recently deferred the proposed Main Board listing of the shares in
Hong Kong, due to the prevailing volatile equity market conditions. Subject to an improvement in market conditions, it is
now expected that the Group will complete its listing in Hong Kong during the second half of 2010.
Risks to the share price: We previously highlighted that sentiment regarding the timing of the Hong Kong listing could act
as both a negative and positive catalyst for the share price. Recent news flow regarding the deferral of the Hong Kong
listing is disappointing and has weighed on the share price. On a medium term view, financial leverage from aggressive
capacity expansion remains a risk.
Scope for valuation to move back in line with peers: With the listing in Hong Kong deferred until the second half of the
year there is clear scope for the Group's valuation to move back into line with its Asian peers in the months ahead. On our
current estimates our target price implies a P/BV of 2.5x for FY 2010, which is at the upper end of the range commanded by
its Asian peer group. The implied PE and EV/EBITDA multiples of 6.7x and 6.0x for FY 2010 are attractive, in our view and
are significantly below the peer group average.
|williemanjaro: mikeja -we appear to still be rooted in this false market-and higher global markets having little impact. Another large sell yesterday and precious little buying.
The one positive-the RNS from June 1st----I`ll continue to ignore market negatives and concentrate upon WCC`s V- bright prospects-and NOT the lowly WCC share price---mighty frustrating though!|
|culchi: NCB comment today
West China Cement GBp 605.00 Valuation Arbitrage Opportunity Reappeared
WCC's share price has posted extremely strong absolute and relative gains over the past twelve months. Year-to-date, the
share price has risen by 35%. However, with the stock now 16% off its recent closing high, the valuation gap with its Asian-
listed peer group provides and attractive entry point for investors. Confirmation that both organic capacity growth and the
Hong Kong listing remain on track, suggests that a valuation arbitrage opportunity has reappeared.
FY results prompted step-up in earnings and TP: Financial results for FY 2009, released in March, beat our revenue and
EBIT expectations by 9.6% and 13.8%, respectively, driven by improved capacity utilization, higher ASPs and a stabilisation
in energy and input costs. Acquisition activity and planned capacity expansion prompted an FY 2010 revenue upgrade of
31% and a 22.1% EPS upgrade. We also raised our target price on the stock to 745p from 560p previously.
Capacity is expanding in line with plans for FY2010: The combination of the acquisition of the Zhen'an plant in January, for
RMB 180m, and planned organic capacity expansion should lift group cement production capacity to 11.8m tonnes by the
end of FY 2010, compared with 6m tonnes at the end of FY 2009. Management also confirmed the full commissioning of
the Yangxian plant in April, comprising of a 2,500 tonne per day NSP clinker production line with annual cement production
capacity of 1.1m tonnes.
Hong Kong listing now planned for June: Having gained approval at its AGM, on 31st March, WCC remains on track to
complete its listing on the Hong Kong Stock Exchange by the middle of this year. The company recently revised the date for
the planned listing from 'on or around the 24th May 2010' to 'on or around the 18th June 2010', subject to the approval of
the listing sub-committee of the board of directors of the Hong Kong Stock Exchange.
Risks to the share price: Near-term, sentiment regarding the timing of the Hong Kong listing has potential to act as both a
negative and positive catalyst for the share price. In the medium term, financial leverage from aggressive capacity
expansion remains a risk, and above industry average margins and capital returns raises the threat of increased
competition in Shaanxi province.
Conclusion & Action:
Having revisited current capacity valuations for WCC's Asian-listed peer group we reiterate our target price of 745p,
implying upside of 23% from today's share price. Our target price is based on an EV/tonne of US$85 and implies a P/BV of
2.5x for FY 2010.
|longsight: Stegrego - I agree. It is all very well posters saying that they don't expect this to go up that much after HK listing. Why? There is simply no reason at all to suppose that HK will price WCC at some huge discount to the sector. Thanks to the excellent aim11 we know that the sector rating wd immediately see WCC priced at above £13. OK the whole sector might take a huge hit over the next month of say 30% correction - that still makes a WCC price of £9. And greater HK familiarity with WCC's particular top notch qualities [as per Mattjos posts etc] straightforwardly demand a premium rating to the sector.
I'm sure many on here are right that the postponed date of the listing has caught out a lot of short term artistes on here who now have to cash in their chips at precisely the worst time. This will pass soon enough.|
|mattjos: Not everybody believes Anthony Bolton's optimism on China is justified. But to judge by the recent share price spike, shareholders in West China Cement Ltd (LON:WCC) certainly do.
WCC is an infrastructure play which has benefited handsomely from the Chinese government's stimulus package. Growth has been rapid - earnings growth over the last four years has been at a minimum 18%, and as high as 92% - and the company looks set for future growth.
Two of the company's original three plants are now producing at full capacity, while the newer Ankang plant produced 1.34m tonnes out of its 1.8m tonnes total capacity last year and should be running at its maximum this year. A new plant in Yangxian starts production this month, while the Mianxian plant will come on stream in Q3, increasing capacity by 2.2m tonnes between them.
Though the company is based in Shaanxi province, its newer plants are well located to supply across the border to the Sichuan earthquake zone where reconstruction efforts will require materials. The company will get to 7m tonnes a year full production once the new plants are working, against 5.08 m tonnes produced last year, and is looking to increase capacity to 11.9m tonnes a year by the end of this year - two acquisitions plus new production lines  . This will give it about one fifth of the market in its home province - the leader in the south of the province - though the company remains a strong regional company, not a national player  .
The recently announced results show revenue up 75%, and operating profit more than doubled, with operating margins up from 33% to 41%. Earnings per share increased from RMB 3.84 to RMB 5.12  . That all looks sterling stuff. Margins expanded as the price of coal fell, while the company sustained the prices which it had increased by 36% in 2008 
However, China's economy is a bit of a worry. It's still growing, but it's difficult to work out how much of that is due to the stimulus package - and there is substantial overcapacity in the cement industry. For instance, an article last year in China Daily suggested that there was a 300m tonne oversupply  .
While last year saw volumes rising, I don't like the fact that prices were flat  . That, I suspect, reflects the fact that supply isn't exactly tight - this is not a seller's market. And it might suggest there's no room to push prices up any further. Any worsening of the supply/demand balance could see prices falling - and my feeling is that negative price elasticity isn't built into the price.
Besides, the Chinese government is now taking measures to rein in overcapacity  . Now that might actually help WCC, as it will mean closing the least efficient plants - and WCC is a modern, relatively large scale, and environmentally friendly producer. It might also lead to consolidation plays in the industry - in which WCC could take part with further acquisitions. (Who knows, a larger producer might even gobble up WCC.)
Another bearish point is that when I look at WCC's balance sheet, I see very high debt - 1284m net debt, against only 1295m equity. That's uncomfortable, I think. (The company confuses matters by referring to this as 50% gearing. I generally don't include the debt on both sides of a gearing formula - I look at debt to equity, not debt to total liabilities.) Then when I look at the cash flow account, I see that the company is spending more on capex than it generates in cash flow - so it's burning cash each year. If this is the top of the cycle, and it might be, that would leave WCC very exposed.
Currently, the stock appears to be trading around 12 times earnings, and that looks fairly cheap. Of course, there's always something of a discount for Chinese stocks. I don't think, though, it's quite enough of a discount for me to overlook the risks.
And the other thing I really don't like is that WCC is leaving AIM to relist in HK - and in the process is shedding its UK based directors. I can understand why a Chinese based board is more appropriate, but as a UK based investor I really want someone looking out for my interests. On the whole, I'm not convinced. More due diligence might be rewarded - but then again, it's my time, and time is money.
|radarlove: "That" IC article is not negative on WCC; it simply suggests you take your profits because of the delisting, not realising that many PIs are intelligent and brave enough to move to the HK exchange.
It views the growing Chinese government control over cement business expansion as a negative although accepts WCC can grow through acquisition. With the move to the HK exchange and the increasing future revenues, I don't see this a problem... and anyway, the ICs prognosis is very much a long term concern rather than short term and is littered with "may be's".
If you're looking to hold towards 2013 and beyond, growth may slow, but short term, there is no problem except coping with a soaring share price!
WEST CHINA LEAVES UK ON A HIGH
"West China Cement (WCC) joined Aim in December at 105p a share and the IC has been a consistent supporter. After a slow start the share price tops 600p but now may be the time to take gains as the company leaves Aim to list in Hong Kong. It's off despite reporting spectacular 2009 results. If a loss on early redemption of warrants is ignored, last year's profits jumped to RMB544m. Behind that increase was a rise in cement production in central Shaanxi province from 3.45m to 5.08m tonnes. Margins were boosted by higher average cement prices and declining coal costs.
By end-2010, a combination of new production lines and two acquisitions should increase output capacity to 11.9m tonnes a year. Then WCC will be the largest cement producer in Shaanxi but the market there is a mighty 50m tonnes a year. So why should WCC investors take gains? It's because, as the company explains, the Chinese government has started to control plant expansion. It's already more difficult to obtain new plant licences and, in future, WCC may have to grow primarily via acquisitions. It appears that the Chinese cement market has been divided into 10 top players producing around 30m tonnes a year with export potential in mind plus 50 regional players such as WCC turning out 10m tonnes or so per annum."|
|celeritas: This is a post from John09 on iii, having done some research on other listings.
Ok folks ive been doing some research on the timelines associated with listing on HK exchange. Used RCG and ACHL as recent case studies
9th Feb official application made to HK. RNS 10th Feb
28th August - Applied to HK
12th November - Considered and approved but needed some amendments
19th November - Approved with amendments
23rd November RNS about approval
25th November RNS saying dealings would commence the next day
26th November dealings commenced share price went ballistic and trading was suspended!
Share price has doubled between August and November by the way
Application date unknown
19th Jan 08 Considered and approved but some amendments needed
2nd Feb - Approved with amendments
9th Feb - Dealings commenced
11th Feb - RNS explaining that the reason the share price went ballistic was because of the HK listing
Note that both companies needed to have an EGM to make approve some changes within these timescales above. ACHL because it reqd a share split 10 for 1 for liquidity requirements and RCG for something to do with the sharesave scheme so potentially the same could happen with WCC.
I do wonder whether we will meet liquidity requirements. A 5 quid share is $61HK. I hope they suggest a 10 for 1 split this too would help the share price ...|
|mattjos: I'm assuming that at some point the WCC share price will start to decouple from AIM trend and pickup the hk trend. until then it may not know if it is arthur or marthur|
West China share price data is direct from the London Stock Exchange