YTL Cement -Value Investing

There are some phrases that often appear when we read articles about investing in stocks and one of the most regular phrases is “value investing”. What this essentially means is that investors actively seek out stocks that they believe the market has undervalued. In a nutshell – it means trying to buy something for much less than its worth.

YTL Cement

YTL Cement started as YTL's in house ready mixed concrete subsidiary. It was listed on the Second Board in 1993 as Buildcon, transferred to the Main Board as YTL Cement in 1997 and, by 2005, became the second largest cement producer with 30% market share. It is also the largest ready-mixed concrete supplier in Malaysia .

Research and Results

The business of YTL Cement has grown to record revenue of above RM1 billion by
June 2006, second only to market leader, Lafarge Cement, the French MNC. If you were to do some research, you will also find that YTL Cement has the highest profit margin, return on assets, 5-year average ROE, P/E ratio and dividend yield in the cement industry (as at 30 June 2006) in Malaysia, overtaking the market leader by a large margin in some of these categories.

Researching as a value investor, if you were to assess YTL Cement, you would have been able to see some simple fundamental facts such as:

• The company has been profitable since day 1, even during the Asian financial crises and the Malaysia cement price war of 2005;
• The company almost tripled its Revenue (growing at 23% p.a.) and Net Income (27% p.a.) from 2000-2005;
• For the last financial year (2005/2006), revenue doubled and net income tripled as the newly acquired Perak Hanjoong Cement operations were consolidated;
• Turnaround prospects for the cement industry for the next 3 years are gaining momentum with the implementation of 9 th Malaysia Plan and perhaps an upward revision of cement prices;
• Top management has a track record of excellence in building businesses into big and sustainable businesses; and
• Average dividend yield from 2000-2005 was much higher than closest competitors.

Dividend Yield