CMS acquires equity interest in Borneo Granite

KUCHING: Cahya Mata Sarawak Berhad’s ( CMS) subsidiary, CMS Resources Sdn Bhd ( CMS Resources) had on November 29 entered into a Share Sale and Purchase Agreement with Kasuma Resort Sdn Bhd ( KRSB) for the acquisit ion of 56,0 0 0 ordinary shares, representing 56 per cent equity interest in Borneo Granite Sdn Bhd (“BGSB”) from KRSB for a total cash consideration of RM 31 million.

The remaining 49 per cent equity interest in CMS Resources is owned by Sarawak Economic Development Corporation.

C omment i n g on t he acquisition, CMS’s group chief executive officer – operations, Goh Chii Bing, said: “The Acquisition is a strategic investment by the Group in a granite quarry located in the southern region of Sarawak, which is a very limited natural resource in the State.

“Granite is required in large quantities for the construction of the Pan Borneo Highway project and this investment positions CMSR as the key supplier of granite for this project.”

CMS Resources also took into consideration the unaudited net assets of BGSB as at August 31, 2018, the market value of its plant and machinery, its financial performance and the tenure of its quarry licence under Permodalan ASSAR

The Acquisition is a strategic investment by the Group in a granite quarry located in the southern region of Sarawak, which is a very limited natural resource in the State. Goh Chii Bing, CMS’s group chief executive officer – operations

Sdn Bhd.

Upon the acquisition, BGSB is expected to generate a strong upward trajectory in its future earnings, with a positive cash f low in the years to come under the management of CMS Resources.

The quarry occupies about 139 hectares of land with two hill reserves. It is readily operational and has a logistic advantage for outbound delivery through a waterway enabling CMS Resources to immediately solve the present shortage of stones instead of acquiring a greenfield granite reserve, which will take a minimum of two years to be operational.

The acquisition is set to further expand the CMSB group’s quarry operations and a planned strategic investment to secure a rel iable and immediate source of granite stone for the Group’s existing and impending projects.

Goh further added: “BGSB i s targeting an annual production of one- mi l lion metric tons. Combined with CMS Resources’ second production line with an annual production output of 1.3 million metric tons at Sibanyis Quarry, we will see a significantly enhanced capacity expansion of CMS Resources’ quarry operations.

“This is particularly timely as peak demand of stones materials for Pan Borneo Highway project is between 2019 to 2021; particularly the requirement to use granite stones for its premix wearing course.

“BGSB is wel l placed to benefit from other projects such as the pending implementation of the coastal road and the second trunk road project by the state government.

“In add i t i o n, mo r e infrastructure projects are already in the pipeline to be implemented over the next two years by the state government through open tenders.

“These projects are expected to create huge demand for stones during the construction period, even after the Pan Borneo Highway project’s completion.

“We believe that our growth strategy for our strategic investments is beginning to come to fruition, whereby our traditional core businesses and our strategic investments are coming together to meet the growing demands of a rapidly developing state.”