Thursday, January 20

CMS to ride on Sarawak’s construction boom ahead

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KUCHING: Analysts across the board are optimistic of Cahya Mata Sarawak Bhd’s (CMS) prospects on the back of a decent start to its financial year 2015 (FY15).

To note, CMS on Monday posted a pre-tax profit RM95.01 million, representing a 44 per cent increase from the previous year’s RM66.19 million in 1Q14.

This was attributed to the healthy growth recorded by most of its divisions.

Maybank Investment Bank Bhd (Maybank IB Research) said construction works in Sarawak is expected to pick up strongly as the Pan Borneo Highway construction project would kick off soon and the 11th Malaysia Plan, to be unveiled on Thursday, could provide for more infrastructure projects in the state.

“CMS would be the main beneficiary of the robust construction activities in Sarawak as the key construction materials supplier in Sarawak,” it said in a note yesterday.

“In addition, it is also eyeing more construction works including the Pan Borneo Highway worth RM27 billion.

Analyst Ng Sem Guan of RHB Research Institute Sdn Bhd (RHB Research) added that CMS could be the beneficiary of an impending state election.

“Although the Sarawak State Assembly’s current term will expire in June 2016, talk over a possible early state election is rife,” Ng outlined in a separate note.

“CMS’ logistics prowess allows it to maintain a tight grip on Sarawak’s cement market.” Ng said RHB Research continued to expect CMS to benefit from initiatives rolled out in the Sarawak Corridor of Renewable Energy (SCORE).

Meanwhile, Maybank IB Research CMS’ proposed acquisition of 50 per cent in Sacofa Sdn Bhd, the concession owner of telecommunication towers in Sarawak, and an additional five per cent stake in OM Materials (Sarawak) Sdn Bhd would enhance its recurring earnings.

“Leveraging on its strong balance sheet, potential acquisitions and new investments would further re-rate the stock.

Management is also looking to raise its dividend payout ratio in the medium term.”