PETALING JAYA: Poised to benefit from Sarawak’s RM9bil development expenditure budget and with its subsidiary having secured a new RM466.7mil contract, Cahya Mata Sarawak Bhd (CMSB) remains a “buy” for RHB Research.
The research house also raised its forecasts for the group’s earnings for financial year 2018 (FY19) to FY21 by 1%, 2% and 1%, respectively, in view of the new contract running for four years until April 2023.
CMSB is the sole supplier of cement in Sarawak with a total capacity of 2.75 million tonnes per annum. It currently runs at 60% of full capacity.
RHB Research noted that cement demand was expected to rise further on the back of the Pan-Borneo Highway Sarawak project, of which progress stands at about 35%.
“The commencement of the Sarawak Highway and Second Trunk Road projects as well as the new Baleh Dam in 2020-2021 also bodes well for the group,” it said in a note.
The brokerage has maintained its target price of RM4.15 for the counter, which offers a 22% upside, and a 3% 2019 yield.
The group announced yesterday that a joint venture of PPES Works (Sarawak) Sdn Bhd and China Communications Construction Co (M) Sdn Bhd - PPES Works CCCC JV Sdn Bhd - had received and accepted a letter of acceptance from the Sarawak government for the proposed construction and completion of the Bintulu-Jepak Bridge crossing Kuala Kemena for RM466.68mil.
PPES Works is a 51%-owned subsidiary of CMSB, with the remaining 49% equity interest being held by the Sarawak Economic Development Corp. The contract runs 48 months from April 3, 2019 to April 2, 2023.
The scope of work includes the construction and completion of the proposed Bintulu- Jepak bridge crossing Kuala Kemena.
The double carriageway cable-stayed bridge will come with a flyover over the Jalan Tun Ahmad Zaidi-Jalan Tun Razak-Jalan Abang Galau traffic junction, with a connecting road spanning about 4km.
CMSB group chief executive officer of operations, Goh Chii Bing, in a statement, said the partnership with CCCC, given its distinguished portfolio and past achievements, would be of great value to PPES Works.
RHB Research, in the note yesterday, said key downside risks to its “buy” call on the counter were the fluctuation of ferrosilicon and manganese prices as well as any delay or cancellation of the Pan Borneo Highway (Sarawak) project.