Stock Analysis

Loss-Making Malayan Cement Berhad (KLSE:MCEMENT) Set To Breakeven

KLSE:MCEMENT
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Malayan Cement Berhad (KLSE:MCEMENT) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Malayan Cement Berhad, an investment holding company, produces, manufactures, and trades in cement, clinker, ready-mix concrete, and other building materials and related products primarily in Malaysia and Singapore. On 30 June 2020, the RM2.2b market-cap company posted a loss of RM174m for its most recent financial year. As path to profitability is the topic on Malayan Cement Berhad's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Malayan Cement Berhad

According to the 6 industry analysts covering Malayan Cement Berhad, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of RM19m in 2021. The company is therefore projected to breakeven around 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 112% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
KLSE:MCEMENT Earnings Per Share Growth March 26th 2021

Given this is a high-level overview, we won’t go into details of Malayan Cement Berhad's upcoming projects, however, take into account that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. Malayan Cement Berhad currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Malayan Cement Berhad's case is 41%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Malayan Cement Berhad, so if you are interested in understanding the company at a deeper level, take a look at Malayan Cement Berhad's company page on Simply Wall St. We've also put together a list of pertinent aspects you should further research:

  1. Valuation: What is Malayan Cement Berhad worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Malayan Cement Berhad is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Malayan Cement Berhad’s board and the CEO’s background.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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