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Mongolian Cement Company Poised For Liftoff

If you are a follower of my writing on investing in Mongolia you may find this of intrest. A recent decision by the Mongolian Parliament to subsidize citizens apartment mortgages bodes well for UB based Remicon JSC. From the Frontier Securities website.

According to Government of Mongolia on February 21,2012 Government resolved the issue of making a reality for citizens 6 per cent soft financing for residential purchases. Government has resolved for Development Bank of Mongolia to issue securities up to 200 billion MNT(149 million USD using Bank of Mongolia's today's reference rate). Finance Minister is to issue a Government guarantee for payments for principal and interests of the securities.

Until funding from issuance of securities of Development Bank of Mongolia will come in, commercial banks are issue soft loans to citizens from their own capital. Finance Minister, Minister of Roads, Tranportation, Construction and Urban Development and Mayor of city of Ulaanbaatar have approved on February 21,2012 procedures to issue soft loans up to 50 million MNT( 37 thousand USD) with 6 per cent interest and duration of 20 years to citizens with low and medium income.

  • The apartments must be enrolled in 100 thousand apartments program which includes 75 thousand apartments in Ulaanbaatar
  • Borrowers should be able to make 10% down payment
  • The apartments will be a collateral and borrowers can pay off loan ahead of schedule
  • Apartments will be built in locations such as Yarmag, Zuun ail, Televiz and 13th subcommittee and state will be responsible for financing required for infrastructure. Also ger substandard housing district will be moved and apartments built. In this way cost of the apartment will be reduced
  • At the moment 79,486 families have been selected from 159 thousand applications into 100 thousand apartments program
  • 28,300 apartments from total apartments in the program will be ready within 18 months and 6,341 apartment have area of 50 sq. meters
  • Government increased area to 55 sq. meters, therefore it has become possible for citizens now to purchase 9,017 apartments
  • For a start, possibility is created for first time buyer families with 1 to 4 family members of 1-18 age to purchase apartments
  • Government aims to fully implement 100 thousand apartment program by 2016.
Remicon JSC (RMC) is a UB based ready mix cement provider that trades on the Mongolian Stock Exchange. From the information I have been able to gather Remicon's sales in 2011 were up 2.6 times over 2010 and earnings were up nearly 200%. This is what happens in an economy growing 17% per year. The shares are currently trading at around eight times earnings which is cheap for a compnay growing 100%+ per year. Remicon was already doing a ton of business just based on the massive growth and construction that is occuring in Mongolia. The fact that 100,000 apartments, 75,000 in UB, are going to built between now and 2016 is only going to supercharge the business, and hopefully the shares, of Remicon. Full disclosure I own shares in Remicon and I am looking to buy more.