Nearly doubling since May, the impressive Steppe Cement (LSE:STCM) share price performance isn’t that uncommon with penny stocks. Indeed, with relatively few shares being actively traded, positive news stories can have a big impact. However, the opposite’s also true.

But short-term price movements can be a distraction. For experienced investors, it’s the future that really matters. With this in mind, what do the group’s prospects look like?

A bit different

Admittedly, a Malaysian-incorporated, London-listed, Kazakhstan-based cement producer sounds like a niche investment. But if it makes money and can deliver impressive shareholder returns, who cares, right?

Indeed, during the six months ended 30 June, it reported a profit of $8.99m compared to $476,000 a year earlier. Earnings per share was 4.1 cents (3.04p). The company also declared an interim dividend of two cents (1.48p), its first since 2021

If its first-half performance was repeated during the second six months, it means the stock’s currently (7 November) trading on an earnings multiple of only 6.6.

Encouragingly, this strong performance continued into the third quarter. Revenue was 19% higher than for the same period in 2025. But we must be cautious. Some of the improvement was due to the appreciation of the Kazakhstani tenge against the dollar. And a 28% increase in the selling price of cement also helped. In fact, production volumes were down 6.5%.

The fundamental issue

For me, the key question is: how’s the group going to continue to improve its earnings sufficently to drive its share price higher?

According to the Eurasian Fund for Stabilization and Development, the Kazakhstan economy will grow by 5% in 2026, 5% in 2027, 4.2% in 2028, and 4.1% in 2029. This sounds positive as the demand for building products is closely tied to the state of the wider economy. However, with the country experiencing double-digit inflation at the moment, the picture’s less clear cut.

More significantly, the group recently reported that a $30m construction project to expand capacity to 2.5m tonnes has started. For context, existing full production is around 2m tonnes of cement.

Completion is expected in the summer of 2027. At the moment, costs are being funded from cash flow — at 30 June, it had net cash on its balance sheet of $16.7bn – and the group “intends to consider the issuance of debt only in scenarios whereby it expands the current project”.

My view

I think it’s fair to say that as a small company – it has a market-cap of £85m – Steppe Cement’s at the riskier end of the investment spectrum.

And because 75.3% of the company’s shares are not in public hands, its share price is likely to remain lumpy.

Investing in penny stocks isn’t normally my thing. But in this case, I think a small position in Steppe Cement could be considered. It’s therefore going on my watchlist for when I next have some spare cash.

There’s always going to be a need for cement and, logically, increased production should lead to higher earnings. All other things being equal, this should help boost the group’s share price.

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James Beard does not hold any positions in the companies mentioned.