[ET Net News Agency, 24 October 2017] Macquarie Research raised its target price for
China National Building Material (CNBM)(03323) to HK$7.35 from HK$5.89, and maintained its
"outperform" rating.
After CNBM proposed the merger with Sinoma (01893) on 8 September 2017, the research
house thinks the major investor concerns were: (1) a delay in the timeline for the EGM and
hence the merger; (2) whether the companies could obtain the relevant regulatory
approvals. The good news is that CNBM expects a final decision from the Ministry of
Commerce on the anti-trust filings, which has been a major concern for investors, by
mid-December 2017.
Macquarie believes other regulatory approvals for the proposed merger such as SASAC and
CSRC are likely to be granted, given
their group companies have been merged and gone through similar processes.
Macquarie said that CNBM should be a major beneficiary of better cement pricing and this
should more than offset the winter volume reduction. CNBM's Henan operations should
benefit from Xiong'an development in the long term.
But it cut its EPS forecasts by 9-23% for 2017-19 to reflect its latest QHD coal price
forecasts, and the high proportion of minority interest for total net profit (40% in
9-month 2017 compared to 30% in Macquarie's ASP forecasts to reflect stronger pricing with
better supply discipline. (KL)