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West China Cement has a simple, strong product, using very modern facilities, and is ideally placed as the second largest cement producers in the central China region of Shaanxi. It has ambitious but quite achievable targets for growth, an excellent growth track record and is currently stunningly good value.

WCC has raised significant capital to fund the development at Ankang, which has recently come on stream, soon to raise production capacity by 50% (1.8 million tonnes) to about 5.3m tonnes. The full benefit will be seen in H2 2009. The debt incurred for completing this development is expensive (due to the dreadful credit markets), but could still be comfortably repayed over the next 2 years, given the strong demand for their products and cash flow, if WCC were not aiming for further growth in production of 2m tonnes by Q3 2010.

Two new 1m tonne p.a. plants near the city of Hanzhong are targeted to come on stream in mid 2010. Debt for this new development should be charged at a modest 5%. The longer term target is to increase capacity yet further to some 10m tonnes p.a. by 2011.

Strong product: WCC has won awards for the quality of their building materials (e.g. in 2007 an award for Outstanding National Laboratory in the Building Materials Industry; more recently in January 2009 they were "Provincial Model Enterprise for Environmental Protection"). WCC was the first in Shaanxi to get ISO14001 (Environmental Management system) accreditation. They also use waste heat for power generation. This is important, as small and less green and efficient producers have been shut down. The Lantian waste heat project was completed in August with expected cost savings of RMB 14 million p.a.. WCC naturally got official praise for this too.

Ideally Placed: While the current downturn has hit export-based areas of China such as Guangdong, WCC is well removed from this, being located in Shaanxi, one of the key provinces targetted by the government for infrastructure development, with a host of roads and railways being planned and built to both improve the local transport links and also use Shaanxi as a corridor connecting other parts of China. The government's huge stimulus package specifically targets this kind of development, and in this area. WCC's recent expansion with Ankang, and the two new 1m tonne developments at Yangxian and Mianxian (near Hanzhong), are in the South West of Shaanxi, where there is little competition and robust demand, so margins should be good. WCC have won a number of contracts in the last year, and have obviously excellent prospects for more, which will result in a healthy order book. Currently, there is additional demand from the earthquake-shattered areas of neighbouring Sichuan, and WCC are providing cement for reconstruction work.

The board is well connected, with the CEO Jimin Zhang being a Shaanxi Congress Delegate, advising on links between government and Enterprise.

Last Results : http://www.westchinacement.com/newEbiz1/en290yaobores/images/in/ss3.pdf



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This one is on a current year PER of just over times 2, and a forward PER of under times 2. Makes it very cheap.

I had a change of stance on this one and have been buying in since 120p levels, and see the potential here to do a "SOLA" given over 1 pounds of earnings forecasts for next year.


Broker forecasts :


Evolution Watter... 31-03-09 BUY

2009 PTP 56.62m
2009 EPS 78.63p

2010 PTP 75.94m
2010 EPS 104.57p

Another benefit for WCC now, as investement goes, is that it is past the 100 million pounds market cap level.

As is known, recently all stocks under 100m were classed as "micro-cap" by many hedge funds, which will make them "untouchable" to those funds however WCC has crossed that point, and with such outstanding potential is surely going to be of interest to many a hedge fund manager looking for a stock with very high growth potential, but one that is also liquid and above a market cap barrier of 100m and also has the enviable position of having the next few years of their growth pretty much lined up and in the bag already with the effects of the China Domestic Stimulus package.

On the up again today, its difficult to get your head around it, when you see over 100p of earnings forecast for next year, but thats what it is.

Times 6 = 600p.

Many other cement stocks in Asia are presently on times 20 or more. Not worth thinking about, getting to times 6 is already presently considerable upside.

Will it break upwards through 200p before close today, ahead of the long weekend ?

That would put it on a PE of times 2 for 2010 results.........or of times 3 for 2009 results...........

Plenty of upside to come, and a strong rerating over the remainder of 2009 should be happening.

Going over the 100m market cap level now makes this "attractive" and "possible" for hedge funds to start buying, and given the outlook for demand and therefore the strength of the outlook, it must be attractive to some. Would be good to see some chunks getting purchased now and a strong move into the low 200's.

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Fundamentals and forecasts for WCC :


http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?ac=&csi=201989&username=


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Quite stunning when you compare peers on other markets.

I notice that there is a sell note out on "Anhui Conch" who are a cement producer in Anhui. The note says the PER of times 21 is too high, and a new targer price of PER times 17 of current year forecast.


LOL.


Put WCC on current year forecast of 17 times and you get 17 x 1190p (yes near 12 pounds).

Do that again next year and you get 17 times 1785p (year near 18 pounds).

Now its never going to achieve that kind of rating on the AIM market, but they are looking to dual list as part of their loan deal announced last year.

Given the outlook, the peer group ratings on other markets and the liklihood of a dual listing then WCC certainly should fall into most peoples "put some in the bottom drawer" and keep for a couple of years kind of investment.

Not that many potential multibaggers out there, especially ones presently on a PER of less than times 3 and one that is profitable and expanding, now, through the use of internally generated cash.

Couple of media articles, one from Nov last year highlighting that WCC is likely going to be a big beneficiary of the Domestic Stimulus plan in China, and a more recent one from PI, snippets from both below :

http://wallstreetpit.com/998-chinas-585-billion-renovation

................Most of the bailout package will be spent on the raw materials and service-suppliers needed to build roads, bridges, and other infrastructure. We should be looking at companies who operate exclusively in that space. Here’s a few we would consider pure-plays on China aggressive infrastructure spending:

West China Cement (LSE: WCC) is definitely going to be very busy. It produces and sells cement, using environmentally sound practices, under the brand ‘Yaobai Cement’. It has three production lines in the Pucheng area (100 miles north of Xi’an) which can crank out 1.5 million tons of cement a year. A massive new plant, however, is scheduled to be completed in the next six months, bringing total production to 5.8 million tons. West China Cement had sales of about U.S. $430 million last year. Its profits and operating income increased about 70% from the previous year.

Guangshen Railway (NYSE: GSH) is a $107 billion transportation....................


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http://www.proactiveinvestors.co.uk/companies/news/5073/west-china-cement-record-sales-and-approval-for-two-new-plants-in-earthquake-reconstruction-area--5073.html?WCC

..................The company is to set to supply a number of large infrastrucuture projects with cement over the next two or three next years as the Chinese government invests a large sums of its economic stimulus package on roads, railways and post-earthquake reconstruction in Western China.

The company also Monday announced approval for its Hanzhong ........................

LOOKING GOOD.

More good news today for WCC and the like as "cement stocks" were strong in Asian trading today on news of potential for yet more increased demand.


http://www.forbes.com/feeds/afx/2009/04/30/afx6358749.html

Thomson Reuters
China stocks rise 0.8 pct; property, cement strong
04.30.09, 01:04 AM EDT

SHANGHAI, April 30 (Reuters) - Chinese stocks rose 0.83 percent on Friday, with property and cement shares strong after a cut in capital requirements for investment projects while Shanghai-based firms ga.................

http://www.investegate.co.uk/Article.aspx?id=200905051204196840R

AGM result out, interesting........


RNS Number : 6840R
West China Cement Limited
05 May 2009

Result of Annual General Meeting

The Company is pleased to announce that all resolutions proposed at its Annual General Meeting, held earlier today, were duly passed by shareholders.

Brett Miller, Non-Executive Director, made the following remarks in response to a shareholder enquiry:

'Whilst AIM has served West China Cement very well, the Directors believe that a move to the Hong Kong Stock Exchange or London Stock Exchange Full List might be a natural progression for the Company. At the appropriate time, the Board will need to consider the merits, implications and timing of such a listing in detail. However, the Company's main focus at present is the operations of the business and managing the Company's growth, particularly in light of the recent announcement to build two new cement plants in the South West Shaanxi province.'

Enquiries:
Brett Miller, West China Cement Limited
Tel: +44 20 7584 3663


Christopher Caldwell or Emma Brewer, NCB Stockbrokers Ltd
Tel: + 44 20 7071 5200

Some large trades in there today, and the time they go through and the price kind of suggests that someone is buying lumps of WCC and builing a larger holding. Looks to me like institutional buying is going on, and who can blame them. If they can pick up a million of so WCC at sub 300p and wait a couple of years, they should be looking at quite spectacular gains.

Update from IC on 6th April :

http://www.investorschronicle.co.uk/

Tip update

BUY

WCC’s share price has rebounded in 2009 and it’s roughly where it was 12 months ago. Broker Evolution forecasts 2009 revenues of RMB 1.44m and nearly doubled net profits of RMB490m. Buy.

For those interested in a bit more detail of WCC, there are 5 MM's on WCC this being EVO, WINS, SCAP, LIBR and KBC.

Presently quite strong at 5 v 1 at 184/189



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