KUALA LUMPUR (May 16): Shares of Sarawak state infrastructure facilitator Cahya Mata Sarawak Bhd (CMSB) rose as much as 4.68% this morning, after its first quarter net profit increased 51% year-on-year. 

At 10:35am, CMSB pared some of its gains and was up 6 sen or 1.75% at RM3.48, after 102,000 shares exchanged hands. 

Yesterday, CMSB said its net profit for the first quarter ended March 31, 2018 (1QFY18) surge 51% to RM38.98 million, from RM25.86 million a year ago. 

The improvement was largely due to a turnaround in its 25%-associate OM Materials (Sarawak) Sdn Bhd, which operates a ferrosilicon and manganese alloy smelting plant in the Samalaju Industrial Park in Sarawak, it said in its filing with the local bourse.

The earnings corresponded with 13.5% of MIDF Research's full year forecast, and 13.8% of analysts consensus'.

MIDF Research analyst Fadhli Dzulkifly wrote in a note today, however, that the results were dragged by the decrease in profit before tax (PBT) of CMSB's cement segment and property segment, as development is still taking place in Sarawak.

Nevertheless, he maintains the earnings' forecast for 2018 and 2019. 

"Our earnings forecasts lagged expectations, due to slower progress billings from Pan Borneo Highway and slower order for aggregates," Fadhli said. 

"It was quoted from the news that Sarawak’s Pan Borneo segment will continue, hence it is a good sign that recovery is expected in upcoming quarters, especially for the cement and construction materials segment. This is because demand for aggregates would increase incrementally," Fadhli added. 

MIDF has maintained its 'Buy' recommendation for CMSB, with an unchanged target price of RM4.62 per share. 

Fadhli estimates sentiments for construction companies would be negative, pending announcements for big-ticket projects. 

"Thus, we believe that the steep selling in CMSB’s shares, suppressing its share price, unveils the opportunity to increase exposure," he concluded. — theedgemarkets.com

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