Monday, May 24, 2021

Company Prospecting: China Resources Cement 1313

 I did another round of screening for dividend stock for both SGX and HKEX recently.

The criteria I selected are:

1) PE less than 10

2) ROE >20

2) ROIC >15

3) ROA >10

4) Net margin >10

5) Quick and Current Ratio >1

6) Debt to equity < 0.3

7) Dividend yield > 4%

Of the close to 40 counters that appeared, only 3 came from SGX. (Which is quite sad)

After that, I went on to check for consistency or improving trend of the above mentioned metrics, companies that do not give out dividends regularly, or have earnings that are doing a yo-yo are eliminated. I do allow earnings to drop in 2020, given it is a covid here. 

About 3 or 4 counters are left. 

China Resources cement is the only one that made me pulled the trigger today. First, some numbers 






Source of data are from FSM Screener.

The numbers look great for a 7.5% forward yield company, isn't it, with payout ration of less than 50%, and FCF yield of above 10% if you take the 5 years average. 2020 and 2021 Capex is high at 5 billion HKD, company already guided for 2022 Capex of 2 billion which is more like the norm.

Going forward, Q1 results is good, EPS grow 15$ YOY.  (https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0423/2021042300455.pdf)

It is my speculation, that post Covid, China will spend more on infrastructure, and this is the thesis, that lead me to buy into Lonking, which has pans out well so far. 




 Due to the low base effect of Q1 Covid on China, the numbers show a big jump, while margin is lower.

By QoQ the pace of expansion (Turnover)/ and profitability has decreased, margin has fallen too. 

It is highly likely the reason why the company is trading at such low valuation, as people are betting 2021 will be worse than 2020, and this is indeed a risk.

Overall:
Given the track records of the company, and the emerging theme of "Going Green" and "Going high Tech", “IOT" of the New Economy, I believe any reduction in infrastructure in a bump on the road rather than any structurally decline. 

Hence it is a risk I would take. 



9 comments:

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  2. Hi GPI

    U are welcome. Glad u find it useful

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  3. GPI
    U are into bonds and the likes. How is volality for this investment style. I wonder as I aged, should I still do equity concentrated investment.

    What books u read? Any advice

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  4. Just curious. Did you look at its competitor, Anhui Conch Cement? If yes, which is better?

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