Cahya Mata FY17 earnings seen to grow 39%

Cahya Mata Sarawak Bhd (March 9, RM4.19)

Initiate buy with a fair value of RM5.15: The jewel of Sarawak conglomerates, Cahya Mata Sarawak Bhd, focuses on a wide range of businesses — cement, construction materials and trading, construction and road maintenance, information and communications technology, property development and strategic investments.

Cahya Mata is one of the key local participants of Sarawak Corridor of Renewable Energy development projects and the Pan Borneo Highway project, in addition to its existing businesses with the state government.

The company will continue to achieve stellar growth driven by the following: i) as Sarawak’s sole producer of cement and leading construction materials supplier, Cahya Mata has an entrenched position in the supply of building materials and it will continue to gain significantly due to the increasing demand underpinned by mega infrastructure projects in Sabah and Sarawak; ii) steady recurring income from road maintenance in the state through road maintenance concessionaires; iii) owns undervalued land banks which have the potential for property development or can be sold for a hefty premium over the book cost; iv) active involvement in energy-intensive projects and holds a substantial stake in

OM Materials (Sarawak) Sdn Bhd and Malaysia Phosphate Additives (Sarawak) Sdn Bhd which reflect good prospects in the long run; and v) robust dividend payout to investors.

Cahya Mata continues to reward its investors with a dividend payout ratio of at least 40% for financial year of 2016 (FY16) as outlined in its Cahya Mata dividend payout policy.

We project FY17 earnings to grow by 39% underpinned by increasing demand in cement and building materials contributed by mega infrastructure projects, steady growth of construction and road maintenance works due to the recent Pan Borneo Highway project awarded to Cahya Mata (joint venture [JV] with Bina Puri Holdings Bhd), and stable demand from its property development both in Kuching and Samalaju, rising occupancy in Samalaju lodges and potential — land sale of its current undervalued land banks. — AmInvestment Bank, March 8

This article first appeared in The Edge Financial Daily, on March 10, 2017.

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