Saturday, August 22, 2009

BUY OR SELL-SE Asian cement shares; rock solid or overpriced?

* Sign of demand pick-up in Indonesia, Thailand

* Indocement, Semen Gresik, Siam Cement among top picks

* Bears say expensive, shift to property and steel stocks

(For other Reuters BUY OR SELL items, click [BUYSELL/])

By Viparat Jantraprap and Khettiya Jittapong

BANGKOK, Aug 21 (Reuters) - Shares in Southeast Asia's major cement makers such as Thailand's Siam Cement (SCC.BK) and Indonesia's Indocement (INTP.JK) have rallied this year on hopes of a recovery in demand thanks to government stimulus programmes.

The sector suffered when the global recession took a toll on construction demand but is expected to recover along with regional economies and as low interest rates and better consumer confidence boost housing demand.

Still, sector valuations look stretched as share prices have risen by more than two-thirds and future growth depends on domestic politics and government stimulus packages.

STRONG DEMAND SEEN

A positive outlook on Southeast Asia's largest economy, coupled with government stimulus plans should boost cement demand in Indonesia, seen rising 7-10 percent in 2010.

"We are not positive only on the cement sector, but also on the overall economy," said Ami Tantri analyst at Credit Suisse, adding that a pick-up in cement demand in June and July is expected to be sustained.

Credit Suisse has an "outperform" rating on Indonesia's top two cement makers -- Semen Gresik (SMGR.JK) and Indocement.

CIMB analyst Rania Rahmundita, who has rated Indocement as a top pick, expects 2010 cement demand to set a record high. She said increases in fuel costs would be offset by the strength of rupiah currency.

Rahmundita has also upgraded Semen Gresik and third-ranked Holcim Indonesia (SMCB.JK) to "outperform".

Analysts in Thailand are optimistic the government's infrastructure projects will stimulate building materials demand.

Siam Cement, Southeast Asia's biggest cement firm in terms of market value, is the top pick for many analysts. Continued...

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