Malayan Cement Berhad (MCEMENT) - Resilient Demand Supports MCEMENT’s Improving Fundamentals

Budget 2025 was an unusual budget for the construction industry. Despite its record-breaking size of RM421 billion, it makes no explicit mention of mega infrastructure projects—a stark contrast to previous years..

Just yesterday, Transport Minister Anthony Loke approved the final railway scheme for the MRT3 Circle Line —a crucial green light that paves the way for the next major urban rail development.

As Malaysia's largest cement producer, MCEMENT is poised to be a key beneficiary of this rollout.

Here’s a snapshot of MCEMENT’s compelling fundamentals.

 

*Completed the acquisition of 10 companies and their respective subsidiaries from YTL Cement Berhad on 21 September 2021

1. Healthy Cash Flow & Lower Debt

Net debt continues to fall, supported by strong operating cash flow. 

RAM ratings had upgraded MCEMENT's sukuk from AA3 to AA1 on 13 February 2025.

2. Rising Revenue

A steady uptrend in sales signals resilient demand and effective operations.

3. Lower Financing Costs

Borrowings are on a downtrend, reducing finance costs. Further savings are expected with the interest rate cut earlier this month.

4. Improved Tax Efficiency

While FY23 and FY24 saw elevated effective tax rates due to non-deductible interest expenses, 9MFY25 has seen this rate dip below 30%. It remains to be seen—pending the Annual Report 2025—if the company has strategically shifted borrowings to operating subsidiaries to optimise taxes.

5. Stronger Earnings (PATAMI)

Profit after tax and minority interest continues to rise, driven by both topline growth and margin expansion.

6. Rising Dividends

Increasing dividends. The company declared 5 sen per share for 9MFY25 (9MFY24: 4sen/share).

7. Valuation

Trading at around 11x TTM PE with improving fundamentals.

8. Robust Free Cash Flow

Ample cash generation supports both debt reduction and rising dividend payouts.

9. Market Dominance

MCEMENT holds approximately two-thirds of Peninsular Malaysia’s cement market share—an unrivaled position.

10. Resilient Demand

With MRT3, the Penang LRT, the Johor-Singapore Special Economic Zone (JS-SEZ), and the ongoing data centre boom, the demand for cement and concrete products is likely to remain resilient.

"Looking ahead, Malayan Cement’s performance is anticipated to remain robust, underpinned by Malaysia’s active pipeline of infrastructure projects, urbanisation trends and growing industrial developments. Stabilised input costs, particularly coal prices, will keep the Company’s average selling prices and bottom line stable." (RAM Ratings, 13 February 2025) 

Conclusion

Although Budget 2025 didn’t spotlight any new mega infrastructure projects, the approval of the MRT3 Circle Line and commencement of Penang LRT suggest that key developments are still progressing. As the leading player in Malaysia’s cement industry, MCEMENT is well-positioned to benefit from these ongoing and upcoming projects. With resilient cement demand expected, and supported by its improving fundamentals and market leadership, MCEMENT remains a stock worth keeping an eye on in the building materials space.

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Disclaimer: This article is for informational and sharing purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Readers are advised to do their own research or consult with a licensed financial advisor.