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High interest rates hamper growth of cement issuers

11 January 2019 04:17 PM  Company: []
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JAKARTA. The performance of cement issuers still faces a number of challenges, such as the high benchmark interest rate, after being hampered by oversupply in 2018.

Mirae Asset Sekuritas Indonesia analyst Mimi Halimin predicts that domestic cement supply in 2019 will reach 113 million tonnes. "Whereas domestic cement consumption will rise by around 5% yoy (year on year) to reach 73.6 million tonnes," Ms Halimin said as quoted by Kontan, Friday (11/1). "We predict the oversupply gap will last," she added.

Kresna Securities analyst Andreas Kristo Saragih added that the growth of cement consumption this year will only reach 4% or lower than last year at 5.2%. Mr Saragih added that PT Indocement Tunggal Prakarsa (INTP) and PT Semen Indonesia (Persero) Tbk (SMGR) are the two listed companies that deserve to be considered by the market.

INTP has a strong cash flow, according to Mr Saragih. In the third quarter last year, INTP maintained a cash position of Rp 5.8 trillion without debt. Meanwhile, SMGR has the potential to increase production by 50.7 million tonnes per year after acquiring PT Holcim Indonesia Tbk (SMCB). However, SMGR has debts in the form of Rp 6 trillion bonds which are due in 2022 and 2027. (KR/MS)