RAM reaffirms Cahya Mata Sarawak’s IMTN rating


KUCHING: RAM Ratings has reaffirmed the AA3/Stable rating of Cahya Mata Sarawak Bad’s (CMS) RM2 billion Islamic Medium-Term Notes Programme (2017/2037) as well as the AA3/Stable/P1 corporate credit ratings of the group.

The reaffirmation of the ratings is based on the firm’s opinion that CMS’s credit metrics will remain commensurate with the ratings going forward.

Also supporting the ratings is the Group’s strong business profile as Sarawak’s sole cement manufacturer, it said.

“CMS’ somewhat diversified sources of income are also viewed favourably, albeit mostly related to the construction sector and confined to Sarawak,” it said in a ratings report yesterday.

“Backed by a strong market position and vertically integrated operations, the Group is expected to benefit from the development of the Sarawak Corridor of Renewable Energy (SCORE), the State’s ambitious digital economic transformation plans and the Pan Borneo Highway project, which is anticipated to pick up next year.”

RAM said the ratings continue to reflect the group’s healthy financial profile, despite a slowdown in the state’s construction sector. CMS’ profit before tax for the first nine months of financial year 2017 (9MFY17) had risen 44 per cent y-o-y.

This was supported by a reduction in the cost of production of cement, the completion of its property project in Rivervale, as well as higher share of profits from associates.

“Despite the drawdown of RM500 million from the IMTN programme, CMS’s financial profile stayed robust with a gearing ratio of 0.26 times as at end-September 2017,” it added.

“Its large cash reserves of RM739 million, meanwhile, had kept it in net-cash position as at the same date. Following the drawdown, CMS’s annualised FFO debt cover for 9MFY17 came in lower, albeit within our expectations, at 0.33 times.

“In the absence of large capex requirements and with stronger cashflow generation going forward, the group is envisaged to maintain a healthy FFO debt coverage of above 0.30 times and gearing of below 0.40 times.”

Moderating the ratings is the geographical concentration risk that the group faces, RAM said. As its entire business operation is based in Sarawak, CMS’s performance is dependent on economic conditions in the State.

“Moreover, as the group’s products are targeted at the property and construction industries, it also has to contend with the cyclical nature of these sectors. Additionally, CMS’s investments in commodity processing ventures at Samalaju are exposed to execution risk and volatile commodity prices.”