CRH shares rally on bid reports

11th Jun 2015 09:03

Shares in Irish building materials group CRH rose 2.7% on Thursday following media reports that it will take part in the preliminary bidding for South Korean Tongyang Cement & Energy on 12 June, for which it has reportedly hired Goldman Sachs as an underwriter.According to reports, CRH could pay up to $900m.Tongyang Cement was put on the market in April. Goodbody Stockbrokers pointed out that the South Korean market consumes about 45m tonnes of cement from total capacity of around 65m tonnes.Tongyang reportedly has capacity for 11m tonnes and is the second largest cement producer in South Korea."While CRH is just completing its biggest deal with the acquisition of assets from Lafarge /Holcim, the chief executive officer noted on the conference call post the recent IMS that the acquisition pipeline was quite strong across the businesses," said Goodbody analyst Robert Eason."Indeed, he noted that some of this was lumpy with one at $1bn and another at €750m. It looks like the latter could be the South Korean cement business."Given the cash flow generation of CRH (net debt to earnings before interest, tax, depreciation and amortisaton set to be close to 2x at end of full-year 2016), we believe it has the scope to continue to taking part in mergers and acquisitions," said Eason.Goodbody rates the stock at 'buy'.