.

Alan Gibbs at Waverton appears very bullish on West China Cement (WCC).

I agree with him on this company, perhaps not on some of his other views.


http://www.citywire.co.uk/adviser/-/news/fund-manager-views/content.aspx?ID=340459&Page=2

http://www.trustnet.com/News/Printable.aspx?scope=Offshore&id=36568


.

Outlook statement from China Shuangji Cement's final results which were released on last Friday :

Business Outlook:

The Company is currently building a new 1 million metric ton cement plant outside Zhaoyuan City to replace the old Zhaoyuan plant and will be completed in July 2009. The Company acquired fifty-one percent ownership in a 300,000 metric ton plant in nearby Longkou, Shandong in April 2009 and will upgrade capacity to 500,000 metric tons by July 2009.

"We foresee positive business sales in the fiscal first quarter and beyond due to the Chinese Government decision to shut down a collection of small cement plants by the end of 2010 and the Chinese Government's recently announced 4-trillion-RMB ($586 billion) economic stimulus plan. This will result in expanding our cement market and increased commodity price for cement," stated Mr. Song.


Which confirms that the government is actively shutting down smaller and polluting cement producers (ones which also produce inferior grade cement) and they are encouraging the growing producers who utilise new plants and new cleaner technology. Which is why WCC is forecast to make over 100p of earnings in 2010, and much higher levels again in 2011 when all the plants presently planned contribute to a full year of revenue and profits.

WCC will continue to grow their output as demand is robust from not only continued construction projects, but also the shutting down of smaller cement producers.

Strong again today. When you look at the development of "expressways" in China (which in the UK would be classed as motorways) its quite staggering.

Again a benefit here is that expressways are now being built more so in central and western China, along with lots of cement roads replacing mud ones, and so, being in the right place where the demand is, a company like WCC can grow very strongly in the coming years.

Historical Development of Expressway Length in China

Year Distance (KM)

01-01-1988 0

01-01-1989 147

01-01-1990 271

01-01-1991 522

01-01-1992 574

01-01-1993 652

01-01-1994 1145

01-01-1995 1603

01-01-1996 2141

01-01-1997 3422

01-01-1998 4771

01-01-1999 8733

01-01-2000 11605

01-01-2001 16314

01-01-2002 19453

01-01-2003 25200

01-01-2004 29800

01-01-2005 34300

01-01-2006 41005

01-01-2007 45339

01-01-2008 53913

01-01-2009 60346

01-01-2010 65000 (projected)

Good news for WCC, as the price of electricity/coal is a major cost for cement producers. Over-capacity and weak prices is excellent for boosting margins, and boosted they should be in 2009 and 2010 at this rate.

http://www.mineweb.net/mineweb/view/mineweb/en/page38?oid=83752&sn=Detail


Is China headed for coal production overcapacity?

China's voracious energy demands notwithstanding, a China Coal Industry official suggests a trend for overcapacity may be emerging.

Author: Dorothy Kosich
Posted: Monday , 25 May 2009

RENO, NV -

The deputy director of the China Coal Industry Association says "weak demand has resulted in a clear trend for overcapacity" in the country's coal industry.

The nation's coal production incre...............

Outlook is very exciting as we all know. Taiwan companies see the potential too, the future looks very enticing for WCC and their location and prospects.

http://cens.com/cens/html/en/news/news_inner_27765.html

Taiwanese Cement Firms Step Up Investments in China

2009/06/01

Taipei, June 1, 2009 (CENS)--

To vie for the business opportunities generated by China`s policy to boost domestic demand, Taiwan-based cement producers are increasing investments in China.

Asia Cement Corporation said it would invest over NT$5 billion (US$153.37 million at US$1:NT$32.6) to set up four kilns in China in the next three years. Chia Hsin Cement Corporation will invest over 100 million renminbi to exp........................

Good news :

http://www.investegate.co.uk/Article.aspx?id=200906090700135534T

RNS Number : 5534T
West China Cement Limited
09 June 2009

West China Cement Limited (AIM:WCC)

Contract Wins

Shitian Expressway and Baotou - Xi'an Railway Line

West China Cement Limited ('WCC'), the AIM listed cement production and sales company located in Shaanxi Province, China, is pleased to announce it has won contracts on two projects in the area.


Shitian Expressway

The more significant of the two is winning the majority of contracts up for tender for the Shitian Expressway project. As at 31 May 2009, Shitian Expressway had opened 64 tender sections, 51 of which are in Ankang Section and 13 in Hanzhong Section. WCC won 43 contracts in Ankang and 11 in Hanzhong, resulting in an overall number of 54 contracts obtained so far, an impressive 84% of the total sections up for tender. There are another 25 sections within Hanzhong region that are yet to be opened for tender. This accomplishment can be credited to the experienced WCC team, the reputation of the Company, and the market share and advantageous geographical locations in which WCC operates.


The Shitian Expressway is of great importance as it links Central China and North Western China. It runs from Shiyan in Hubei Province to Tianshui in Gansu Province, passing across 11 counties in southern Shaanxi Province, linking Ankang and Hanzhong. The total mileage is 750 km, of which 480 km is in Shaanxi Province.


Construction of the Expressway commenced in late 2008 and is expected to open to traffic in 2011. The estimated cement consumption for the sections that fell within WCC's sales radius is 3 million tonnes, with 1 million tonnes per section needed specifically for Ankang West Section, Ankang East Section and Hanzong Section respectively.


An investment of RMB 32 billion (2.8 billion) has been allocated for this project and given its scale and breadth, it will be instrumental in facilitating provincial productivity distribution and economic development.


Baotou - Xi'an Railway Line

On 1 June 2009, biddings for three sections of the Baotou - Xi'an Railway Line took place. WCC tendered for the one section running through the Weinan region, where WCC's Pucheng plant is located and consequently was awarded this section. The estimated cement consumption for this section is approximately 600,000 tonnes.


The line will be 935 km long and will connect Baotou in Inner-Mongolia and Xi'an in Shaanxi Province. The sections that were opened for bidding stretch from the Yulin region in Northern Shaanxi to the Weinan region.


Commenting on the projects, WCC's Chief Executive Officer Jimin Zhang said:


'I am delighted with the wins on both projects. The high percentage of Sections on the Shitian Expressway that have been awarded to us is a result of the determination of our successful team at WCC. These are significant projects for the Provinces involved with large scale investment which will enhance productivity distribution and economic development for all the regions involved and beyond.'



For further information, please contact:


Citigate Dewe Rogerson

Pui Shan Lee Tel: + 86 21 6340 4186 / Mob: + 86 138 1712 5781

ps.lee@citigate.com.cn


Susanna Gale Tel: + 852 2533 4607 / Mob: + 852 9457 4356

susanna.gale@citigate.com.hk


Notes to Editors:

West China Cement listed on the AIM market of the London Stock Exchange on 4 December 2006, raising approximately 20.1 million net of expenses.

Prior to the listing, the Company, which is headquartered in Xi'an the provincial capital of Shaanxi Province, had operated three cement production plants in Pucheng with a combined production capacity of 1.5 million tonnes per annum since 2003.

In order to service the growing demand for cement in the region, a new plant running two cement production lines, funded by money raised at the IPO, opened in Lantian in 2007 and has a production capacity of 2 million tonnes.

The company's 1.8 million tonne third plant at Ankang started producing and selling cement in March 2009 and is expected to reach full capacity in the second half of 2009.

Approval for the building of two new cement plants, Yangxian and Mianxian, each with a capacity of 1 million tonnes per annum, was announced in March 2009. With the massive government spend on infrastructure as part of the RMB 4 trillion fiscal stimulus package and the need to rebuild in the wake of the Sichuan earthquake which occurred in this area, the Company has chosen the appropriate location to build these latest projects.

Enjoying a superb long holiday but keep getting alerts about WCC going up leaps and bounds.

Nice to see it moving, but its still cheap as chips below 10 pounds, so no reason to get excited yet just keep on holding and adding.

Enjoy.

Edit.

Given 2010 EPS could be well over 120p and given the ratings for these companies on the Hang Seng, my target is 15 pounds by 2012, all being well.

Present forecasts are for 2009 EPS of over 77p and 2010 EPS of over 103p.

However, these are based on cement prices that are currently 20% below what the actual price is where WCC sell. Its also based on higher energy costs than currently are actually in effect.

Therefore certainly upgrades are possible for 2010. For 2009 I would just like them to get near to the 77p, so around 73p or a bit more.

For 2010 we could see 120p EPS or more.

With the current price of 250p they are on just over a 2010 PER of times two. Far too low given the recent IPO's in Hong Kong.

So certainly ten pounds a share is a more fair valuation, and there is potentially lots more upside to come as people come to realise just how cheap WCC is, and its cheap but has liquidity meaning its possible to buy large and sell large through a decent stockbroker.

Pro S - Its good to see the recent rises, and awakening of the market. One factor, over and beyond the pure economics of this company is a secondary listing, which in itself would mutliply the share price overnight.

WCC are comitted to this over the medium term so yet another sterling reason to buy/add.

As interims are due in September its worth working out what kind of quarterly earnings should be seen in 2009 to estimate the realms of target earnings.

The new plant will be 100% production from late August onwards, therefore Q4 will be the best earnings for the year.

Could be something like Q1=15P, Q2=15P, Q3=20P, Q4=25P giving a full year 2009 of 75p.

Based upon that we should be looking for between 25p to 30p of earnings for the interims in September, and then 75p for the full year.

The new plant starting its run up process is the reason for the increase in earnings in Q3 and then it being 100% on line for Q4 the rise again in Q4.

In the region of 25p to 30p at interims would be fine and in line. Anything more could lead to upgrades for the full year forecast which is presently 77p.

More development of the plants and increasing efficiencies along with cheaper energy costs could lead to 4 quarters of 30p earnings in 2010, which gives the 120p figure I have for 2010 earnings.

On top of that the recently announced two smaller plants come on line, again leading to potential for Q4 2010 being higher, and leading to a 2011 potential earnings in the region of 150p to 170p all of course depending on cement prices and energy prices amongst the other variables.

With a potential forecast in the region of 150p to 170p for 2011 its the point at which I would attempt the secondary listing and exit strategy for the founders, and why I would look to 2011 for that from the BOD as I said earlier. Crystal ball gazing but it does not hurt to be thinking a few steps ahead.

Cement prices in Shaanxi still nice and high.

http://www.cementchina.net/news/shownews.asp?id=5920

(Shaanxi of WCC fame comes under North West Shanxi, not the North China Shanxi in the link)

Brokers using circa 300RMB prices for forecasts for WCC.

Actual as can be seen is 20% higher at over 370RMB.

Nice .

Cement prices in their home province (North West Shanxi (Shaanxi)) are up again being +5 to 378RMB now.

http://www.cementchina.net/news/shownews.asp?id=5953

Provided they keep above 300 then I am happy.

An interesting Friday last week with a sharp shake down and then finishing up on the day, may or may not bode well for some strength this coming week.

Interims next month.

Rising well today.

Appears that SCSW gave WCC a good write up over the weekend and a buy rating. ( http://www.scsw.co.uk/ )

Cannot blame them given the potential for this company going forward. Should be looking at over 150p of earnings for 2011, so you can guess what the stock price might be at that time.

in many ways, it's quite a tempting stock (despite its parentage!), but it is so thinly traded - about 130k per day - that even buying 2500, or trying to sell same in a soggy market could prove problematic ..... the spread also tends to be pretty hefty too

I thought you didn't like any China stocks cynic especially this one ,we had a ding dong about this a couple of years ago,,why the turnaround ,(not having a dig by the way) .

i don't like china stocks, and i allude to that in my post ..... for all that, i contemplated having a few of these, but for the reasons above, have decided against

Trading in size is not a problem, you just need a good broker, not an online one or a bucket shop job.

2500 shares for on line trades is suffucient for plenty of PI's. 5 trades of that size and thats 30K pounds traded.

i have L2 and can deal direct with the market .... my comment remains the same about illiquidity