CMS still well positioned to benefit from govt devt plans
According to AmInvestment Bank Bhd (AmInvestment Bank), these development plans are the SCORE growth nodes which includes becoming the master developer of Samalaju and the ongoing construction of the Pan Borneo Highway (PBH), which will benefit CMS as a major supplier of building and construction materials for the said project.
The research firm highlighted that the other plans include the proposed mega infrastructure projects like the Baleh Dam (construction to commence in 2021) and public infrastructure projects like LRT and BRT in Kuching.
Additionally, the group’s 50 per cent-owned SACOFA is expected to grow organically on the back of bandwidth growth, rolling out of LTE sites and increased fiberisation from the combined RM1.5 billion allocation from the state and federal governments.
Given the recent change in the federal government, AmInvestment Bank believed it may take slightly longer for CMS to secure the renewal of the group’s state road maintenance concession (which was previously pending finalisation from the relevant authorities).
“To recap, CMS has been granted a six-month state road maintenance extension till June 30, 2018,” the research firm said.
“This is a transitional measure pending the negotiation and finalisation for the renewal of the concession on a longer term basis.
“Besides, the company is eyeing for maintenance work for PBH (under federal government jurisdiction).”
AmInvestment Bank pointed out that CMS guided to dispose of the group’s landbank worth less than RM50 million by the second half of financial year 2018 (2HFY18) to potential strategic or joint venture (JV) partners like in the past, as was the case with Sentoria Group for a water theme park development.
On estimates, AmInvestment Bank’s cut its FY18 earnings by eight per cent while maintaining its forecasts for FY19-20F.
The research firm’s FY18F, FY19F and FY20F core net profits amounted to RM228 milion, RM280 million and RM296.8 million, respectively.
In contrast, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) maintained its forecasts for financial year ended 2018-2019 (FYE18-FYE19).
MIDF Research’s FY18F and FY19F profit after tax and minority interest (PATAMI) were at RM286.3 million and RM290 million, respectively.
The research arm’s earnings forecasts lagged expectations due to the slower progress billings from Pan Borneo Highway and slower order for aggregates.
“Considering that, we asses that it is premature to revisit our earnings assumptions for FYE18-FY19,” MIDF Research 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 cement and construction materials segment.”
The research arm noted that this is because demand for aggregates would increase incrementally.
“We have estimated that sentiments for construction companies would be negative pending announcements for big-ticket projects.
“Thus, we believe that the steep selling in CMS’ shares suppressing its share price unveils the opportunity to increase exposure.”
Source: Borneo Post Online