FREE Special Report: Eagle Cement IPO Analysis #4 (by AP Securities)

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EXCLUSIVE Eagle Cement Corp. (EAGLE) IPO Reports! (With Target Prices!):

 

Eagle Cement Corp. (EAGLE) IPO — Our Partner Broker’s Analysis

SUMMARY OF ANALYSIS AND RECOMMENDATION

Eagle Cement Corporation (EAGLE) set its final offer price at PHP 15.00 / share.

Valuations are at a premium as compared to the EV/EBITDA of comparable Holcim Philippines (HLCM) at 9.4x and Cemex Holdings Philippines (CHP) at 9.1x, but lower than regional peers of 9.6x.

Given superior margins and high earnings growth trajectory due to future expansions, the pegged EV/EBITDA multiple for EAGLE is 11.0x, the high-end valuation of ASEAN peers.

This translates to a fair value Target Price estimate of PHP 18.35 / share for EAGLE, an upside of 22.3% from its offer price. Brisk demand on the offer and sound fundamentals may result to a run-up in price. Reiterating recommendation to SUBSCRIBE.

 

DETAILS OF EAGLE’s OFFER

 

COMPANY AND INDUSTRY ANALYSIS

EAGLE conducted an investor briefing in relation to its upcoming offering from May 16, 2017 to May 22, 2017. The key takeaways from the said briefing are as follows:

 

Confident on 1st Quarter (1Q) 2017 Results. HLCM, Republic Cement, and CEMEX posted 1Q 2017 earnings decline of 37%, 48%, and 24%, respectively. This is chiefly because of the high base last 1Q 2016 due to it being a pre-election period, and as infra spending failed to get traction. While EAGLE did not disclose theirs, reports quoted that earnings growth is on the “high teens”.

Management reiterated earlier that they are looking to replicate their historical double-digit growth for this year. Ramon Ang was also quoted in the news that the offer price of PHP 15.00 translates to a 2017 P/E of 16.0x, which is in line with our forecast of PHP 5.0 billion earnings for this year.

 

Updates on Expansion Plan. EAGLE will finish the construction of its third production line (2.0 million MT production capacity) in its Bulacan plant by 2018. The incremental production from the third line is planned to be marketed to the MIMAROPA region and the surrounding areas until 1Q 2022, the projected commissioning of its Cebu Plant.

The strategy is to build the EAGLE brand in the VisMin region prior to operations of the Cebu Plant. With the planned expansion, EAGLE expects some pressure on margins due to additional distribution costs and increased competition (CEMEX is the largest player in the VisMin region). But EAGLE also pointed out that:

(a) They have the inherent advantage in terms of pricing since their products are priced PHP 1.00 to PHP 2.00 lower than their competitors; and

(b) The Cebu plant will commence operations five years from now and they expect demand to grow rapidly in the VisMin area as the government pushes for infra spending.

 

FINANCIAL HIGHLIGHTS

Eagle Cement Corp. (EAGLE) IPO — Our Partner Broker’s Recommendation

Eagle Cement Corporation (EAGLE) set its final offer price at PHP 15.00 / share.

At this price, EAGLE will be trading at a 2017 EV/EBITDA of 9.4x, and 2017 P/E of 16.0x, assuming a net income of PHP 5.0 billion or an EPS growth of 20.4%.

Valuations are at a premium as compared to the EV/EBITDA of comparable Holcim Philippines (HLCM) at 9.4x and Cemex Holdings Philippines (CHP) at 9.1x, but lower than regional peers of 9.6x.

Given superior margins and high earnings growth trajectory due to future expansions, the pegged EV/EBITDA multiple for EAGLE is 11.0x, the high-end valuation of ASEAN peers.

This translates to a fair value Target Price estimate of PHP 18.35 / share for EAGLE, an upside of 22.3% from its offer price. Brisk demand on the offer and sound fundamentals may result to a run-up in price. Reiterating recommendation to SUBSCRIBE.

 

EXCLUSIVE Eagle Cement Corp. (EAGLE) IPO Reports! (With Target Prices!):

 

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AP Securities (formerly Angping & Associates Securities)
AP Securities (formerly Angping & Associates Securities)

AP Securities (formerly Angping & Associates Securities) is one of PinoyInvestor’s partners in delivering superior and reliable stock research reports that help Filipino investors make smart stock investing decisions! Learn more about them here.