AN APPRECIABLE DIVIDEND RESILIENCE
A net improvement in market share following the acquisition of Cimsud :
Despite an unfavorable sectoral context, CIMAR outperformed its market at the end of H1-20. The operator posted cement sales volumes down -7.1% against -17.8% for the sector. According to the parent company Heidelberg Cement, the acquisition in May 2020 of Cimsud by CIMAR would have allowed a net improvement in its market share. Acquired at a price of nearly MAD 280 Mn, Cimsud operates a grinding unit in Laâyoune with an annual production capacity of 500 KT.
Consolidated revenue amounted to MAD 1,696 Mn in H1-20, down -16.9% given a double negative price/volume effect. As we underlined in our report (Cf. Covid-19: Glimmers of hope at the end of the tunnel), the operator shows a good momentum in its Clinker exports, which offsets the drop in domestic sales. In terms of profitability, we note a decline in the operating margin of -4.6 pts to 31.0% at the end of June 2020. This under-performance would be attributed to the drop in selling prices on the local market. In the end, the recurring net income readjusted by the contribution of MAD 100 Mn to the special Covid-19 fund, shows a limited decline of -11.4% to around MAD 500 Mn.
A stable dividend policy, supported by a deleveraged Balance Sheet :
Since 2010, CIMAR has adopted a regular payout policy through an increase in the DPS by at least MAD 5 per year. For the FY 2019, the Group surprised the market by offering a DPS worth MAD 100 including MAD 15 as an extraordinary DPS. This is an increase of 17.6% compared to 2018 in a context where several listed companies have waived any dividends distribution.
The deleveraged Balance Sheet, the solidity of margins and the communication of the Management reassure us about the sustainability of this dividend policy on the MT.
A stock to HOLD, thanks to the resilience of its D/Y level
In our opinion, CIMAR is among the resilient stocks in terms of dividend yield. This is an average target D/Y of nearly 5.8% over the period 2020-2022 partially financed by a recurring cash of more than MAD 2.0 Bn. Based on the DDM method and a cost of equity of 9.2%, the target price of stock settles at MAD 1,490. Therefore, we recommend HOLDING the stock in portfolios.
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