The research slashed its fair value on the stock by 20% to RM1.14 a share from RM1.42 previously, based on 8x FY21 forecast earnings per share.
In its recent company update, AmInvestment kept its view that the government has very limited room for fiscal manoeuvre.
"Already, S&P Global Ratings downgraded Malaysia’s outlook to negative from stable on 26 June 2020 to reflect a heightened risk of fiscal deterioration, weighed down by the economic impact of the Covid-19 pandemic, depressed oil prices and fiscal stimulus," it said.
It added that the rollout of work packages from the RM11bil state reserves-fuelled infrastructure projects, such as the Coastal Road, Second Trunk Road and 11 mega bridges, have hit a snag after the initial hype.
AmInvestment is also cautious over the potential threat to the market dominance of existing players in Sarawak's construction and building material sector on the back of a dynamic political landscape in Malaysia.
"Increased competition could put a dent on CMS’ prospects of winning new construction jobs and concessions, as well as sustaining high margins for its construction, road maintenance and cement businesses," it said.
Following a recent meeting, AmInvestment said CMS has guided for its Phase 2 cement plant upgrading to begin in 1Q2021 due to delays in the introduction of additional safety precautionary measures following a Covid-19 infection.
Post-upgrade, it estimates that CMS' dependence on clinker imports will decline from 60% to 45% to 50%.
Meanwhile, 25%-owned CMS associate OM Materials (Sarawwak) could only break even in FY20 with indications of it slipping into the red in 2H20 due to a drop in the selling prices of ferrosilicon.
However, the expansion plan comprising the construction of up to four more manganese alloy furnaces remains slated for completion in FY22.
CMS also remains hopeful for the state government to roll out more public infrastructure projects ahead of the 12th Sarawak state election although it notes that the execution has been disrupted by the pandemic.
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