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CEMENTSouthern CementAlso known asSPCCPriceSR60.0Pricing / Valuation as on May 27, 2009Mkt capSR8.4bn ($2,243.0mn)Sh. outstanding140.0mnKey statistics52 week range H/L (SR) 84.5/45.1Avg daily turnover (mn) SR US$3m 4.56 1.2212m 5.93 1.58Raw Beta 6m 3yr0.40 0.65Reuters3050.SEBloombergSOCCO ABPrice perform (%) 1M 3M 12MAbsolute (%) (5) 15 (27)Market (%) 6 32 (39)Sector (%) (6) 19 (44)Website: www spcc com.saValuation multiples2006 2007 2008P/E (x) 16.4 17.4 8.2P/B (x) 4.7 5.2 2.8P/Sales (x) 10.0 10.6 5.0Div yield (%) 5.5 5.2 10.7Southern Province Cement Company (SPCC) is one of the top three cementproducers in KSA. Established in 1978, the company operates three productionfacilities in Jizan, Bisha and Tihama with a combined capacity to produce over 6mntonnes of cement each year. In 2008, SPCC sold nearly 4.9mn tonnes of cement.Company financials2005 2006 2007 2008YoY(%)CAGR(%)(05-08)Net Revenues SRmn 1,024 1,026 1,155 1,298 12.4 8.2EBITDA SRmn 690 688 769 864 12.4 7.8Net Income SRmn 615 624 704 791 12.4 8.8Assets SRmn 2,230 2,491 2,648 2,749 3.8 7.2Equity SRmn 1,973 2,201 2,345 2,360 0.6 6.2Total Debt SRmn - - - - - -Cash & Equiv SRmn 678 27 33 64 95.7 (54.5)EBITDA Mgn % 67.4 67.0 66.6 66.6 - -Net Mgn % 60.0 60.8 60.9 60.9 - -ROE % 31.8 29.9 31.0 33.6 - -ROA % 28.4 26.4 27.4 29.3 - -Div Payout % 387.3 89.7 89.5 88.5 - -EPS SR 4.4 4.5 5.0 5.7 12.4 8.8BVPS SR 14.1 15.7 16.7 16.9 0.6 6.2Source: Company, NCBC ResearchSegment-wise business analysisProduct segment 2007 Geographic 2007%Rev % Net Inc Breakup %Rev % Net IncCement Production 100.0 100.0 Saudi Arabia 100.0 100.0Weightage (%)TASI (free float weight) 0.85MSCI Saudi (domestic – mid cap) 7.59Free float (%)Free float 45.37Relative share price perf.11,0009,0007,0005,0003,000M ay-08 Aug-08 Nov-08 Feb-09 M ay-09TASITop 5 shareholders (%)10080604020-Southern Cement (RHS)Public Investment Fund 37.4General Organization for Social 13.0Insurance (GOSI)Source: Company, NCBC Research• Business brief: SPCC has been able to maintain its domestic market share in 2008despite the strengthening competition. In terms of sales volumes, the company held15.5% share in the domestic cement market, slightly lower than 2007. The companyholds 5.62% stake in Industrialization and Energy Services Company.• Financials: SPCC’s cement sales volumes for FY08 increased by 6.7% whichcaused 12.4% y-o-y rise in revenues to SR1,297.9 mn. EBITDA margin rose to 66.6%in 2008, thus remaining at the same level as in 2007. Net margin has remainedconsistent at almost nearly 61% in the past three fiscal years.• Recent developments: In April 2009, SPCC announced a 15% y-o-y decline inQ109 net profits to SR200.2mn. Capital Market Authority (CMA) fined the company inDecember 2008 because it disclosed their nine-month and semi-annual results ofFY08 before submitting them for review. In the recent past, SPCC completed capacityexpansions at its plants. In 2007, the company stated that its new Tihama Cementfactory commenced operations with a daily production capacity of 5,000 tonnes ofclinker.Source: NCBC ResearchJUNE 2009SOUTHERN CEMENT140