Analysts encouraged to see CMS progressing well
KUALA LUMPUR: Analysts are encouraged to see Cahya Mata Sarawak Bhd’s (CMS) group operations progressing well, with the future development of Sarawak expected to provide strong narrative to CMS’ longterm sustainability.
In its fourth quarter of financial year 2018 (4QFY18) results review on CMS, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) remained positive on group given its steady progression.
“Altogether, we are encouraged to see that the group’s operations are progressing well, denoting positive tone on production demand and construction progress,” MIDF Research said.
“Moving forward, we see the future development of Sarawak will provide strong narrative to the long-term sustainability of CMS, which has significant presence in the state.
“Accordingly, we believe the state’s development plan funded by RM9.1 billion budget allocations will be able to fuel further optimism on the state’s construction outlook.”
According to MIDF Research, CMS’ fiscal result in 4QFY18 was broadly positive as the group’s 12 months of FY18 (12MFY18) profit after tax and minority interest (PATAMI) recorded growth of 27.7 per cent to RM265.7 million.
“The cumulative earnings came within expectations, accounting for 103.1 per cent and 98.8 per cent of ours and consensus’ yearly estimates,” MIDF Research said.
On CMS’ 12MFY18 income, the research arm highlighted that it was largely underpinned by the group’s construction or road division, growing by 20.8 per cent year on year (y-o-y) to RM554.2 million.
“While its profit before tax (PBT) growth was negligible at 0.2 per cent y-o-y, the quantum was steady at RM90.4 million, versus RM90.2 million in the same period last year.
“We understand that strong income was largely recognized from the on-going construction of Pan Borneo Highway, the MiriMarudi road rehabilitation and the Sarawak Museum projects.”
Meanwhile, MIDF Research took caution of the lower margins realised at PBT for Cement and Construction Materials segments despite a healthy growth in revenue.
The research arm noted that this was mostly apparent in cement division, which accounted for 33 per cent of the group’s total income in FY18.
“Whilst its revenue increased by seven per cent y-o-y, PBT however dropped 11 per cent y-o-y to RM90.1 million.
“The decline stemmed from repair costs at its clinker plant and the increase in imported clinker price due to supply shortages globally.”
Moving forward, MIDF Research expected margin could trend better as it made allowance for possible reduction in cost or unit output.
“We think the approach is feasible, as management closely monitor and optimise its plant performance.
“We learned that management has set a sales target of 1.58 million metric tonnes (MT) in FY19 for the cement division.”