EPF Board accumulates extra two million shares in CMS

KUCHING: The Employees Provident Fund (EPF) Board has accumulated an additional two million shares in Cahya Mata Sarawak Bhd (CMS) since this month.

Purchasing on a daily basis from Oct 2 to 10 in the open market, EPF has raised its holding in CMS by 2.01 million shares to 20.05 million units, filings with Bursa Malaysia showed.

However, it did not state the prices paid for the additional shares.

CMS was listed among the top five of RHB Research’s Top Malaysian Small Cap Company (30 Jewels) 2013 Edition recently.

According to the research house, CMS is a Sarawak-centric conglomerate regarded as the best proxy to Sarawak Corridor of Renewable Energy (SCORE), which is set to propel the state development.

“The group has a tight grip on the fast growing cement industry in Sarawak while its other core divisions are set to ride on the state’s growth story,” it added.

RHB Research said as SCORE was set to take the state economy to new heights, it would bolster CMS cement, building materials, construction, property and road maintenance divisions.

CMS is Sarawak’s sole manufacturer of cement, with demand in the state reported to grow at more than 9% annually between 2010 and 2012.

“CMS supplies about half of Sarawak’s high quality asphaltic concrete (premix) and bitumen emulsion requirements.

“It is also a substantial player in stone aggregates and a trader of various types of construction materials within Sarawak.”

The group maintains some 4,800km of state road and 680km of Federal road via separate concession agreements expiring in December 2017 and August 2018 respectively.

“We foresee its road maintenance division to be a solid cash cow up to 2018 at the least,” according to RHB Research.

The research house said CMS group was unlocking the value of its vast landbank, including the remaining 1,704ha which is currently being developed under Bandar Baru Samariang project and 113ha being developed under The Isthmus project.

Under SCORE initiatives, CMS is teaming up with OM Holdings Ltd in a 20:80 joint venture firm OM Materials (Sarawak) Sdn Bhd (OMS) which is currently building a ferro alloy smelting plant in Samalaju Industrial Park.

“Though CMS only holds an associate stake in OMS, we expect this unit to generate rich returns for the group.

“CMS’s solid balance sheet, further supported by its net cash position, allows the group to take on any atractive investment opportunities, particularly in SCORE.

“CMS’s strong cash-generating capacity provides scope to reward shareholders via a 30% dividend payout commitment,” said the research house.

RHB Research is bullish about CMS and has a “buy” recommendation for the company with a target price of RM7.55.

CMS is currently trading around the RM5.20 level after surging to over RM6 in June, the highest level in more than a decade.

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