PETALING JAYA: Cahya Mata Sarawak Bhd
’s earnings growth is expected to remain robust, supported by oncoming construction and infrastructure projects announced in the recently tabled Budget 2023.
Further underpinning the diversified conglomerate’s prospects is the Sarawak state government’s previous projection of a RM100bil capital injection by 2030.
According to MIDF Research’s projection, the Sarawak state’s budget allocation alone would translate into quality job flows over the next few years.
“This is where Cahya Mata is positioned to benefit both ways, through construction projects and road maintenance jobs, and also through the supply of building materials, as it is the sole cement manufacturer in the state,” the brokerage wrote in its report yesterday.
MIDF Research noted Cahya Mata, whose outstanding order book currently stood at RM600mil, was actively bidding for projects related to infrastructure development in Sarawak.
“We opine that the prospects are bright for construction in Sarawak with the federal government’s commitment to develop Sabah and Sarawak.
“This is evident from the recently tabled Budget 2023, where RM5.6bil was specifically allocated for Sarawak’s development expenditure, on top of RM2.50bil that was allocated for Sabah and Sarawak for public amenities,” it said.
“There is also the commitment of expediting the Pan Borneo Highway and the Sarawak-Sabah Link Road, which the federal government estimates will cost a total of about RM20bil,” it added.
Reiterating a “buy” call on Cahya Mata, MIDF Research raised its target price for the company’s shares to RM1.55 from RM1.47 previously.
Conversely, TA Research revised its target price for Cahya Mata downwards to RM1.43 from RM1.51 previously, while maintaining its “buy” call on the company.
The brokerage noted the lower target price came after it reduced its earnings forecasts for Cahya Mata and rolling forward the valuation base year to financial year 2024 (FY24).
Factoring in higher raw materials and energy costs, TA Research cut its earnings forecasts for the company for FY23 by 18.2% to RM148mil and for FY24 by 15% to RM158.6mil. It introduced FY25 numbers with a projected net profit of RM174mil, which represented an earnings growth of 9.7%.
MIDF Research noted cost optimisation would be top of Cahya Mata’s agenda for FY23 to improve its long-term margins for the cement division, citing the company’s management.
