[Hidden Market Picks] Asia Cement: Rosy outlook with Halla Cement acquisition

2017.12.18 15:38:59 | 2018.01.25 11:28:07

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Asia Cement Co.(Kospi: 183190), a Seoul-based cement, concrete and chemical company, eyes strong growth with its acquisition of more profitable rival Halla Cement Corp.

The firm said on Friday it plans to issue 68.4 billion won ($62.8 million) worth of new shares to finance the 365.1 billion won buyout. If it succeeds in selling the new shares, it is expected to save about 3 billion won a year in interest payments.

Asia Cement is likely to benefit from what is seen as one of the last remaining acquisitions in the industry. The performance of Halla Cement, whose operating margin is 2.6 percentage points higher than that of Asia Cement, would be reflected on its buyer’s consolidated balance sheet from February next year.

Once the deal is finalized, Asia Cement will command a share of 21 percent to rank among the top three players that wield price-setting power in the Korean cement industry. The acquisition is anticipated to spark renewed growth for the company after a years-long plateau.

Korean Investment & Securities has lowered its price target on Asia Cement by 10 percent to 172,000 won to reflect the dilution of shares from the rights offering.

Asia Cement is forecast to close this year with an operating profit of 63 billion won on sales of 477 billion won this year. In 2018, the operating profit is projected to surge 112 billion won and sales to 989 billion won.

For more information, please contact Lee Kyung-ja, analyst at Korea Investment & Securities, at kyungja.lee@truefriend.com or visit Financial Supervisory Service (http://englishdart.fss.or.kr/). Company details and latest quarterly report can be searched under Asia Cement or 183190.

Latest trading data is available via Korea Exchange under Asia Cement or 183190.

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