Analysts positive on CMS’ prospects moving into FY23

KUCHING: Analysts are positive on Cahya Mata Sarawak Bhd’s (CMS) prospects moving into the financial year 2023 (FY23) with projects that might potentially benefit the group in terms of job replenishments and supply of building materials.

Following an analysts briefing with CMS, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) said it came away feeling positive on group’s future performance as management focuses on improving its cost efficiency.

“Being the sole cement manufacturer in the state, CMS stands to benefit from the potential rise in jobs flows. It raised its cement prices earlier this year by about 10 per cent for the first time in six years,” it said.

It noted that CMS’ management is not planning to raise prices any further for now despite coal prices still being rather elevated and will instead focus on improving its plant efficiency and on its procurement and logistic arrangements.

“We are positive on CMS’ prospects moving into FY23, in line with projects that may be rolled out in the state as the newly formed federal government commits to develop East Malaysia, on top of a capital injection of RM100 billion by 2030, both of which would translate into a steady flow of jobs, that would benefit CMS in terms of job replenishments and supply of building materials.

“We are also positive on its upcoming phosphate business in the longer-term, which is set to take on Kazakhstan and Vietnam, the two powerhouses that have dominated the yellow phosphorus industry for year and no new entrants into the industry are expected at least for several years to come,” the research team opined.

Meanwhile, on CMS’ performance, MIDF Research noted thatCMS’ construction revenue rose slightly by 0.2 per cent y-o-y in 9MFY22 to RM291 million while its PBT grew about 25 per cent y-o-y to RM5 million, mainly due to higher gross margin recognised from an offshore gas plant project.

“CMS’ outstanding construction orderbook stands at RM600 million, made up of projects such as the Bintulu Jepak bridge and the Pan Borneo Highway. Management is aiming to bid for projects related to the Autonomous Rapid Transit, Petchem Earthworks, the proposed upgrading of Jalan Sultan Tengah in Kuching and the Emart Underpass.

“CMS also expects to bid for other projects such as the construction of coastal and rural roads, bridges, expansion of water and electricity grids to rural areas and maintenance works in major sections of state roads. There is a replenishment target of RM1 billion over the next two years,” it added.

On its 60 per cent owned Malaysian Phosphate Additives Sarawak (MPAS), it said, the group fired its third furnace on Wednesday and the final fourth furnace will be fired up before the end of 2022.

“The commercial production is expected to start early next year. Management reiterates its guidance that MPAS is able to turn cash flow neutral by FY23 and is projected to generate profit by FY24.