Oman Cement Company

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Global Research
Result Update
Equity – Oman
Cement Sector
13 March, 2011
Oman Cement Company
Market Data
Bloomberg Code:
OCOI OM
Reuters Code:
OCCO.OM
CMP (13 Mar 2011):
OMR0.591
O/S (mn) 330.9
Market Cap (OMR mn): 193.3
Market Cap (USD mn): 501.8
P/E 2011e (x): 9.2
P/Bv 2011e (x): 1.3
Price Performance 1-Yr
High (OMR): 0.737
Low (OMR): 0.413
Average Volume: (000) 227.5
1m 3m 12m
Absolute (%) -3.5 -7.0 -12.2
Relative (%) 1.0 -8.7 -14.3
Price Volume Performance
BUY
Target Price
OMR0.681
Increase in net income despite drop in revenues in 2010
Production & sales volume dropped by 17.9% and 20.2%, respectively
4,000TPD clinker line to come online by end of 1Q-2011
Up-gradation & modernization of packing plant has been completed
Government reimbursement raises net income by 3.3%
Oman Cement Company recorded net income of OMR25mn (EPS: OMR0.08) in 2010 as
compared to OMR24.2mn (EPS: OMR0.07) in the previous year. Increase in net income
was resulted despite drop in the production and sales volume. Reimbursement of
OMR7.3mn from Government of Oman was the major reason for increase in the net
income of the company. Furthermore, the net income growth was lower because of
payment of OMR2.2mn by the Company as social contribution towards resettlement of
residents effected by environmental status of the Company.
Drop in production and sales volumes
Company reported 17.9% and 20.2% drop in production and sales volume in 2010.
Cement production reached 1.7mn in 2010 as compared to 2.0mn in 2009. On the other
hand sales volume dropped to 1.7mn during the year as compared to 2.1mn in 2009. Drop
in the sales volume was because of inflow of cheap cement from neighboring countries.
Exports volumes rose by 78.1% to 41.2k while the local sales dropped by 21.3%.
2,000
1,600
1,200
800
400
0
0.80
0.70
0.60
0.50
0.40
0.30
Decline in realization prices because of stiff competition
During 2010, the company’s average realization prices dropped by 4.7% to OMR29.8t/ton
as compared to OMR31.3mn in 2009. Local sales prices went down by 3.4% to
OMR30.4/ton while export price declined by much higher percentage of 11.3% to
OMR38.9/ton. Drop in the local sales price was because of stiff competition in the market
where regional players are dumping their produce at much lesser prices.
New clinker capacity to come online by 1Q-2011
The 2 nd expansion project to install a new production line of a rated capacity of 4,000TPD
clinker is in progress and the project is expected to come online by the end of 1Q-2011.
Once operational, company’s clinker capacity would double to 2.4mtpa as compared to
1.2mtpa currently. Hence for 2011, we have assumed an operational clinker capacity of
2.1mtpa at utilization rate of 80%. The new clinker capacity would make the Company self
sufficient and would result in discontinuation of clinker imports ranging between 0.5-0.8mn
tons in the past 3-4 years.
Volume (000)
Faisal Hasan, CFA
Head of Research
fhasan@global.com.kw
Tel.: (965) 22951270
Hettish Karmani
Senior Financial Analyst
hkumar@global.com.kw
Tel.: (965) 22951281
Global Investment House
www.globalinv.net
OCC (OMR)
Revision in Estimates - 2011e
(OMR mn) Earlier Estimates Revised Estimates % Change
Revenue 58.0 53.1 -8.4%
Cost of Sales (32.0) (29.5) -7.9%
Operating Profit 23.0 20.5 -10.9%
Net Profit 23.0 21.3 -7.6%
Source: Global Research
Valuation update
We have downgraded our fair value by 12.3% to OMR0.681/share as compared to
OMR0.764 earlier. Drop in the fair value is because of hike in the risk premium of the
Company to 7.5% along with decline in our estimates. Global Research has added 1%
political risk to their risk premium because of recent uncertain political scenario in the
region. The stock at its current price of OMR0.591 is trading at a discount of 15.2% to our
fair value. We reiterate our BUY recommendation on the stock.

Ratio Analysis
Cash Flow
Balance Sheet
Profit & Loss Statement
Global Research – Oman
Oman Cement Company
Financial Statement
(OMR mn) 2008 2009 2010 2011e 2012e 2011e 2012e
Net Sales Revenue 63.5 68.3 51.9 53.1 55.8 57.6 58.6
Cost of Sales (49.7) (42.0) (29.2) (29.5) (30.4) (31.1) (31.6)
Gross Profit 13.9 26.2 22.7 23.7 25.4 26.5 27.0
General & Administrative Expense (2.9) (2.5) (5.2) (3.2) (3.3) (3.5) (3.5)
Operating Profit 11.0 23.7 17.5 20.5 22.0 23.1 23.5
Other Income 3.2 3.6 10.6 3.5 3.1 2.8 2.5
Share of Result of Associates 0.0 0.0 0.1 0.1 0.1 0.1 0.1
Net Finance Income (0.1) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0)
Profit Before Taxation 14.1 27.4 28.2 24.0 25.2 26.0 26.1
Taxation (1.6) (3.1) (3.2) (2.8) (2.9) (3.0) (3.0)
Net Profit 12.5 24.2 25.0 21.3 22.3 23.0 23.1
Cash and Bank Balance 4.6 2.3 3.2 3.5 5.7 8.6 9.6
Receivables and Prepayments 7.1 5.1 5.6 5.8 6.1 6.3 6.4
Inventories 15.2 7.7 9.4 9.7 10.0 10.2 11.3
Investments 3.6 7.8 6.4 7.0 7.7 8.5 9.4
Other Assets 14.7 2.1 16.8 16.8 16.8 16.8 16.8
Long-term Deposits 12.4 22.4 17.8 19.6 21.6 23.7 26.1
Investments in Associates 0.6 0.6 0.7 0.8 0.9 0.9 1.0
Investments Available-for-Sale 15.3 13.6 12.8 14.1 15.5 17.0 18.8
Net Fixed Assets 59.4 91.8 99.5 99.6 98.6 97.6 96.4
Total Assets 133.0 153.5 172.2 177.0 183.0 189.7 195.7
Loans 0.9 4.1 7.4 6.6 6.0 5.4 4.8
Payables 7.1 4.9 7.7 6.1 5.4 4.7 3.0
Others 7.0 8.6 8.7 8.1 8.2 8.3 8.3
Paid -up Capital 33.1 33.1 33.1 33.1 33.1 33.1 33.1
Reserves 34.8 35.9 35.7 36.9 38.3 39.9 41.6
Share Premium 6.7 6.7 6.7 6.7 6.7 6.7 6.7
Revaluation Surplus 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Retained Earnings 43.3 60.2 73.0 79.4 85.2 91.6 98.1
Total Shareholders Equity 117.9 135.9 148.5 156.2 163.4 171.4 179.6
Total Equity & Liability 133.0 153.5 172.2 177.0 183.0 189.7 195.7
Cash Flow from Operating Activities 3.5 32.7 27.6 22.4 25.1 25.9 24.3
Cash Flow from Investing Activities 8.1 (30.8) (17.9) (6.4) (5.7) (5.9) (6.2)
Cash Flow from Financing Activities (9.2) (4.1) (8.9) (15.6) (17.2) (17.1) (17.1)
Net Change in Cash 2.4 (2.3) 0.8 0.3 2.2 2.8 1.0
Net Cash at End 4.6 2.4 3.2 3.5 5.7 8.6 9.6
Current Ratio (x) 4.5 2.9 3.2 3.9 4.7 5.7 7.7
Quick Ratio (x) 2.9 2.0 2.5 3.0 3.6 4.5 6.0
Gross Profit Margin (%) 21.8% 38.4% 43.8% 44.6% 45.5% 46.1% 46.0%
Operating Margin (%) 17.3% 34.8% 33.7% 38.6% 39.5% 40.1% 40.0%
Net Profit Margin (%) 19.7% 35.5% 48.3% 40.0% 40.0% 39.9% 39.4%
Return on Average Assets (%) 9.4% 16.9% 15.4% 12.2% 12.4% 12.3% 12.0%
Return on Average Equity (%) 11.0% 19.1% 17.6% 14.0% 14.0% 13.7% 13.1%
Debt / Equity (x) 0.01 0.03 0.05 0.04 0.04 0.03 0.03
Cash Return On Capital Invested (%) 15.4% 22.5% 21.7% 17.9% 17.9% 17.5% 16.8%
EV/Ton (OMR) 51.3 133.3 83.1 76.4 75.3 74.0 73.4
Dividend Yield (%) 0.0% 2.9% 5.8% 7.6% 8.5% 8.5% 8.5%
EV/Revenues (x) 1.51 3.65 4.16 3.74 3.51 3.34 3.26
EV/EBITDA (x) 5.29 8.14 6.71 7.12 6.70 6.40 6.31
Book Value Per Share (OMR) 0.36 0.41 0.45 0.47 0.49 0.52 0.54
Market Price (OMR) * 0.30 0.75 0.64 0.59 0.59 0.59 0.59
Market Capitalization (OMR mn) 99.6 247.5 211.8 195.5 195.5 195.5 195.5
EPS (OMR) 0.04 0.07 0.08 0.06 0.07 0.07 0.07
P/E Ratio (x) 7.94 10.21 8.46 9.20 8.76 8.51 8.48
P/BV Ratio (x) 0.84 1.82 1.43 1.25 1.20 1.14 1.09
Source: Company Reports & Global Research
* Market price for 2011 and subsequent years as per closing price on MSM on March 13, 2011
March – 2011 2

Global Research – Oman
Oman Cement Company
Disclosure
The following is a comprehensive list of disclosures which may or may not apply to all our researches. Only the relevant
disclosures which apply to this particular research has been mentioned in the table below under the heading of disclosure.
Disclosure Checklist
Company
Recommendation
Bloomberg
Ticker
Reuters
Ticker Price Disclosure
Oman Cement Company BUY OCOI OM OCCO.OM OMR0.591 1,10
1. Global Investment House did not receive and will not receive any compensation from the company or anyone else for the
preparation of this report.
2. The company being researched holds more than 5% stake in Global Investment House.
3. Global Investment House makes a market in securities issued by this company.
4. Global Investment House acts as a corporate broker or sponsor to this company.
5. The author of or an individual who assisted in the preparation of this report (or a member of his/her household) has a direct
ownership position in securities issued by this company.
6. An employee of Global Investment House serves on the board of directors of this company.
7. Within the past year, Global Investment House has managed or co-managed a public offering for this company, for which it
received fees.
8. Global Investment House has received compensation from this company for the provision of investment banking or financial
advisory services within the past year.
9. Global Investment House expects to receive or intends to seek compensation for investment banking services from this
company in the next three month.
10. Please see special footnote below for other relevant disclosures.
Global Research: Equity Ratings Definitions
Global Rating
Definition
STRONG BUY
BUY
HOLD
SELL
Fair value of the stock is >20% from the current market price
Fair value of the stock is between +10% and +20% from the current market price
Fair value of the stock is between +10% and -10% from the current market price
Fair value of the stock is < -10% from the current market price
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March - 2011 3

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