CIMB Securities believes recent concerns over a potential spike in coal costs for Malayan Cement Bhd are overblown, saying the cement producer has sufficient coal inventories and remains relatively insulated from near-term supply disruptions in Indonesia.
The research house maintained its BUY call and RM8.50 target price on Malayan Cement, adding that the stock’s sharp retracement since mid-August has created a more attractive risk-reward profile.
CIMB said selling pressure on Malayan Cement shares may have been driven by investor concerns over weather-related disruptions to key coal barging routes in Indonesia, compounded by renewed tensions in the Middle East.
It cited reports of growing disruptions to coal shipments from mines in Central Kalimantan after a strong El Niño affected navigation along the upper reaches of the Barito River.
Central Kalimantan produced about 47 million tonnes of coal in 2025, representing roughly 6% of Indonesia’s total production of 817 million tonnes.
Despite the disruptions, CIMB expects the impact on Malayan Cement to remain manageable as the group has secured sufficient coal stockpiles until November 2026.
The research house also noted that the latest Indonesian benchmark prices for low- and medium-grade coal for the first half of September had actually declined by 1.1% and 1.9%, respectively, compared with the second half of August.
CIMB expects any substantial increase in coal prices to be restrained by softer demand from China and India, traditionally Indonesia’s two largest coal buyers, as both markets diversify their supplies towards countries including Russia, South Africa and Australia.
Malayan Cement is also working to improve operating efficiency and increase its use of alternative fuels and materials to manage production costs.
CIMB’s coal price assumption of US$90 per tonne for FY2027-FY2028 remains above the spot price of US$83 per tonne for Indonesia’s medium-grade 4,800 kcal HBA coal as at Sept 4, providing some buffer in its earnings assumptions.
On the domestic front, CIMB expects cement prices to remain relatively stable for the remainder of 2026, barring significant changes in oil prices.
Domestic bagged cement prices traded within a relatively narrow range of RM25.30 to RM25.95 per bag during the first seven months of 2026.
The research house said this was consistent with feedback from construction and property industry players, who do not anticipate significant swings in cement prices over the rest of the year.
Following the recent share-price weakness, Malayan Cement is trading at about 12 times FY2027 forecast earnings and 11 times FY2028 earnings, below its historical mean price-to-earnings multiple of 16 times. It is also valued at around one time FY2026 price-to-book value.
CIMB said the steep valuation discount appeared unwarranted given Malayan Cement’s dominant position in the domestic cement market, relatively sturdy balance sheet and return on equity of Malayabout 11%.
The group had a net gearing ratio of 12% as at June 30, 2026.
Malayan share price is at 5.65, down 25% from 6 months ago.
