Deep-dive 2022-1: Holcim Philippines
The highest-quality cement producer in Asia trading at a decade low valuation
Holcim Philippines (HLCM PM) is the largest cement producer in the Philippines. It owns 4 cement plants in the country, together with grinding mills, distribution terminals and related assets.
The company is a subsidiary of the world’s largest cement company in the world - Switzerland-based Holcim. It, therefore, enjoys access to the parent’s technological know-how and access to talent from the broader Holcim organisation.
Value investors love cement stocks. They perceive cement companies to enjoy local monopolies, arising from the fact that cement is expensive to transport relative to its value. They tend to be cash flow generative. On the other hand, cement companies are cyclical and overcapacity can persist for decades.
The Philippine cement market is in an early stage of development. The fact that cement consumption in the Philippines is only 320kg/capita suggests that volume growth will continue for many years ahead. The country’s demographics are excellent and the commodity property sector is still in its infancy.