We maintain an ACCUMULATE rating on Yamama, the Saudi cement producer, with a fair value of SAR 51.2 per share, presenting an upside of 11.8% over the recent closing price of SAR 45.8. With record earnings in Q1 registering SAR 277 million, the second quarter came in at a disappointing 25% drop with earnings reported at SAR 209 million. This was mainly attributed to the issuance of a price ceiling of SAR 240 per ton by the Saudi Ministry on domestic cement producers, motivated by the desire to maintain Saudi construction efforts. Despite this, Yamama’s deliveries fell by 12.5%, resulting in a 16% drop in revenues over Q1. Accompanying the company’s February dividend of SAR 2.00, Yamama declared a stock dividend whereby for every 2 shares outstanding, 1 new share is distributed. Furthermore, the cement producer paid SAR 1.5 per share in July 2012, resulting in a dividend yield of 6% based on the 2011 EOY closing price.
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