KUALA LUMPUR: Maybank Investment Bank (IB) research said roll-out of major infrastructure projects and better-than-expected contribution from its 80-per cent owned phosphate subsidiary are among potential upsides for Cahya Mata Sarawak (CMS).
It has a "Buy" rating on the stock, with a target price of RM1.30 a share for the company. A 29 per cent upside to its current price of RM1.03 a share.
CMS remains a liquid proxy to higher construction activities in Sarawak.
Maybank IB research said the RM44 million loss in the third quarter of financial year 2023 (3Q) by the phosphate operations is a full reflection of the quarterly operational and finance costs, pending the resumption of electricity supply (to enable it to start commercial operations) after it was cut on July 10, 2023 due to a dispute relating to a power purchase agreement term.
The dispute is now awaiting arbitration, with the evidentiary hearing fixed on Aug 26-30, 2024.
CMS saw positive contribution from both the cement divisions and the acquisition of Oiltools in 3Q.
Revenue for the cement division grew six percent year-on-year in 3Q due to higher sales volume with robust demand for cement in Sarawak.
While the acquisition of Oiltools, completed on Sep 6, 2022, was the second largest contributor to group revenue and profit before tax in the nine month period of FY23 at 24 per cent and 26 per cent respectively.
"Key takeaways from CMS' post-3Q23 results briefing are that the group will continue to take proactive measures to improve on efficiencies; it will continue to explore opportunities to create, optimise and unlock value for shareholders; and Sarawak's economic prospects remain strong in the medium to longer term," Maybank IB research said in its report.