Cahya Mata Sarawak’s FY23 below par, but analysts maintain buy call
Cahya Mata Sarawak Bhd’s (Cahya Mata Sarawak) revenue for the full financial year (FY23) came in 19 per cent yo-y higher at RM1.20 billion while core earnings declined by 18 per cent y-o-y to RM97.3 million.
“The results came in below ours’ and consensus’ expectations, making up 75 and 88 per cent respectively of the full year estimates,” said analysts with MIDF Amanah Investment Bank Bhd (MIDF Research) yesterday.
“The weaker performance was mainly due to operating losses from the phosphates business and property development.”
Its cement division contributed 57 per cent to the group’s full year revenue, rising 13.3 per cent to RM681.7 million and delivering an operating profit of RM146.04 million, a surge of 1.8 times, indicating a margin of 21.4 per cent, an improvement over 13.3 per cent a year ago.
The improvement was attributable to stronger sales and lower input costs.
“For the full year, Cahya Mata Sarawak’s road maintenance business delivered a revenue of RM119.05 million and an operating profit of RM13.65 million.
“The oiltools division generated a revenue of RM281.26 million with an operating profit of RM29.31 million.
“As for the property development division, it recorded a revenue of RM61.5 million, with an operating loss of RM2.2 million, mainly due to slower property sales and no land sale this year.”
The phosphate division posted a greater yearly operating loss of RM156.7 million due to the commissioning and financing costs incurred.
Most of the costs incurred in FY22 were capitalised as the plant was still in construction phase. Recall that there is an ongoing arbitration with Sesco Bhd following a dispute that led to the electrical supply termination to the phosphate plant in Samalaju.
Thus, MIDF Research maintained its FY24 and FY25 earnings estimates for now pending a briefing by management expected to be held next week.
“We are also maintaining our target price at RM1.32. Despite its underperformance, we continue to like Cahya Mata Sarawak as it remains a key beneficiary of stronger construction job flows in Sarawak, being the state’s sole cement producer.
“This is also in line with management’s optimism on leveraging on strong prospects for Sarawak’s economic growth.
“The Federal Government, under Budget 2024, allocated RM5.8 billion for development in Sarawak and RM7.4 billion for the second phase of the SarawakSabah Link Road.
“All factors considered, we reiterate our buy recommendation on Cahya Mata Sarawak.”