Cahya Mata’s full-year earnings target raised

PETALING JAYA: Following Cahya Mata Sarawak Bhd’s stronger-than-expected results for the first quarter of financial year 2022 (1Q22), some analysts have raised the full-year earnings target for the conglomerate.

Driven mainly by improved performances of its cement and road maintenance divisions, plus share from associates, 1Q22 core earnings grew to RM73.9mil.

TA Research believes demand for building materials in Sarawak is expected to remain healthy, underpinned by local infrastructure projects such as Pan Borneo Highway, Coastal Highway Project and Sarawak-Sabah Link Road.

In a report, the research firm said that it had made adjustments to reflect higher revenue contribution from road maintenance division and revised the utilisation rate higher for the cement division.

“All in, earnings forecasts for financial year 2022 (FY22), FY23 and FY24 were raised by 5.8%, 9.4% and 8.5% respectively,” it added.

It has also tweaked the stock’s target price higher from RM1.70 to RM1.74 and reiterated its “buy” call.

While the results came in above analysts’ expectations, MIDF Research said that the group is not completely out of the woods due to higher raw material costs and supply chain constraints.

“We remain cognisant that higher raw material costs and global supply chain constraints continue to pose challenges towards the group but we take comfort that Cahya Mata has embarked on cost efficiency initiatives to cushion the impact, on top of the ongoing efforts by the construction and trading divisions in pushing out products to the market,” said the research firm.

MIDF Research maintains its FY22 forecast of RM1.17bil in revenue and a core net profit of RM205.6mil, which is in line with the research firm’s view and expectations of its future financial performance.

“We, however, revise our FY23 forecast revenue slightly downwards to RM1.19bil (previously: RM1.23bil) and core earnings to RM205.6mil (previously: RM225mil), taking into account potential delays in projects,” it added.

It maintained a “buy” call with an unchanged target price at RM1.62 on the stock. The research firm expects the cement division to continue anchoring the group’s improving performance moving forward.

Meanwhile, UOB Kay Hian Research noted that contribution from associates in 1Q22 declined 23% quarter-on-quarter but was still higher year-on-year by 51%.

This was mainly due to lower contribution from OM Materials Sarawak on the back of the easing of commodity prices due to the current weak market sentiment caused by the fear of recession and global economic slowdown.

However, prices were still higher than historical average due to structural supply shortage

Recently, Cahya Mata proposed to dispose of its 25% stake in the alloy smelter to OM Holdings Ltd.

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