Kenanga Investment has initiated a coverage on Lafarge Malaysia Bhd with a "market perform" call and target price of RM9.50.
Lafarge is the largest public listed domestic cement manufacturer with a market share of 41.6 per cent in the Peninsular Malaysia based on production capacity.
The brokerage has a positive outlook on the group, due to its strong balance sheet, the bullish sentiment on the construction sector and growth from expansion and exports in the long term.
"In line with our bullish view on the construction sector, we expect demand for cement to improve due to significant pipeline flows from incoming Economic Transformation Programme and 10th Malaysia Plan projects,” Kenanga said in its note.
It said Lafarge is likely to sustain decent sales growth in 2015 following its plans to increase production capacity by 1.20 million metric tones or 9.3 per cent from its existing capacity of 12.95 million metric tonnes.
Lafarge, which engaged in the manufacture and sale of cement, ready-mixed concrete and other related building materials, currently exported between 20 and 30 per cent of its products.
"In the longer-term, we believe Lafarge should be able to gain new markets in Myanmar and other countries in the Asian region," it said.
In the mid-term, Kenanga keeps a positive view on the cement industry as the total amount of contracts to be awarded may reach RM244 billion, coupled with the present confirmed property projects gross development value of RM181 billion.
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