Global values OCC at RO0.676/share

and reiterates BUY on the stock

16/04/2009 00:00 AST

Oman Cement Company (OCC) posted revenue of RO63.5mn which was higher by 9% as per our estimates of RO58.3mn for 2008. Difference in the forecasted and actual revenue was because of the increase in the price cap during the year as well as import of higher amount of clinker and cement.

The value of OCC's shares derived from the weighted average of the DCF and relative valuation methods is RO0.676 per share. The stock closed at RO0.372 on the Muscat Securities Market at the end of trading on 13th April 2009, which implies that the weighted average value of OCC's shares is at a premium of 82% to the share's current market price. At their current price, OCC's shares have a P/E multiple of 10.6x and 7.2x for 2009 and 2010 respectively. We therefore reiterate our BUY recommendation on the scrip.

Financial Performance
Oman Cement Company (OCC) posted revenue of RO63.5mn in 2008 as compared to RO49.9mn in 2007, higher by 27%. Sales revenue increased because of the combined effect of volumes as well as prices. Company sales volume increased by 14.6% to 2.1mn tons as compared to 1.87mn tons in 2007. On the other hand local sales price increased by 12.2% to RO29.7/ton whereas the export price rose by 11.6% to RO36.5/ton.

OCC's cost of sales increased by 69% to RO49.65mn in 2008. The increase in cost was due to high purchase cost of cement and clinker imported under instructions from the government in order to meet the local demand. The company imported 0.92mn tons of clinker during the year to meet the demand, which is 42% higher as against 0.53mn tons during the previous year.

OCC's other income increased by 68% to RO3.2mn in 2008 as against RO1.91mn in 2007. This other income portion has over the years added significant amount to the bottom line.

OCC reported profit before tax of RO14.1mn in 2008 which was subject to 12% income tax resulting in a profit after tax of RO12.5mn as compared to RO17.6mn in 2007. In 2008, the company managed to report net margins of 19.74% as against 35.3% in 2007.

Global Investment House