Friday, February 28

First major job win for CMS since 2009 could be prelude to more contracts ahead


KUCHING: Cahya Mata Sarawak Bhd’s (CMS) first major job win since 2009 consisting of the construction contract to design and build the Sarawak Museum Campus and Heritage Trail in Kuching could in analysts’ view be a prelude to more wins.

In an announcement on Bursa Malaysia, CMS said that PPES Works (Sarawak) Sdn Bhd (PPES), a subsidiary company of CMS Works Sdn Bhd which in turn is a wholly owned subsiary company of CMS had entered into a “Design and Build and Negotiated Contract” with the Government of Sarawak for the proposed Sarawak Museum Campus and Heritage Trail, Kuching, at a total contract sum of RM308 million.

CMS noted that the project comprises the design, construction, fitting out and exhibitory stable for a new world class museum and an adjoining annexe building with a combined total floor space of approximately 30,000 m2.

“The project also includes a heritage trail in central Kuching as well as the period conservation and exhibitory stable for the three existing historical museum buildings and of a pavilion.

“The overall duration of the contract is 60 months. The project is expected to be completed by the first quarter of 2020,” the group said.

According to the research arm of Maybank Investment Bank Bhd (Maybank IB Research), although CMS’ construction arm was established since 1990 and has a strong track record in constructing major infrastructures and buildings in Sarawak, the group has shifted its focus to road construction over the last few years.

“Hence, this contract represents its first major construction job win since 2009, lifting its outstanding orderbook significantly by 51 per cent to an estimated RM908 million,” the research arm said.

Assuming a gross margin of six per cent, Maybank IB Research forecasted a net profit contribution of RM14 million into 2020.

It noted that this translates into earnings per share (EPS) of 1.3 sen to be recognised overthe next five years.

“We maintain our forecasts as the earnings impact is minor,” it added.

Nevertheless, Maybank IB Research noted that this could be a prelude to more construction job wins in the near-term, especially that relating to the Pan Borneo Highway and Sarawak Corridor of Renewable Energy (SCORE).

Meanwhile, the research arm said that CMS’ cement and construction materials businesses are key beneficiaries of the growing construction activities driven by the upcoming Sarawak state election, Pan Borneo Highway works and 11th Malaysia Plan (11MP).

As such, Maybank IB Research maintained ‘buy’ on the stock while its RM5.00 per share sum of parts-target price is under review pending completion of CMS’ acquisition of Sacofa Sdn Bhd.