Moving forward, the research arm expects CMS’ traditional core business activities to pick up pace in the second half of FY21.
KUCHING (September 1): Cahya Mata Sarawak Bhd’s (CMS) cement, trading, and property development segments will maintain its earnings momentum for its financial year 2021 (FY21), with analysts noting that these divisions would post better financial performance on the resumption of operations and construction activities moving forward.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) recapped that CMS’ first six months of FY21 (6MFY21) normalised earnings rebounded strongly by 149 per cent year on year (y-o-y) to RM88.6 million after excluding a gain of disposal of RM28.5 million worth of shares in Kenanga Investment Bank, gain on disposal of land amounting to RM12.7 million, and forex loss of RM9 million incurred in the first quarter of FY21 (1QFY21).
“The higher earning was mainly driven by its core business operations and higher contributions from its cement, trading and property development segments,” MIDF Research said.
“This came in within our and consensus expectations as it accounted for 47 per cent and 51 per cent of respective FY21 full year estimates.”
Moving forward, the research arm expects CMS’ traditional core business activities to pick up pace in the second half of FY21 (2HFY21).
“The profit before tax (PBT) of the cement, trading, and property development divisions in 6MFY21 increased by 119 per cent y-o-y, 281 per cent y-o-y and 101 per cent y-o-y to RM41.52 million, RM2.75 million and RM11.26 million respectively.
“We expect the above segments to maintain its earnings momentum in FY21. We opine that these divisions would post better financial performance in FY21 on the resumption of operations and construction activities moving forward.
“The improvement could be underpinned by cement, property development and trading.”
Overall, MIDF Research posited that the group’s revenue and earnings prospects remain healthy moving forward in anticipation following the resumption of construction and business activities.
“Moreover, the group’s business operations were not much affected during the movement control order (MCO) 3.0 as it deemed as essential services for the construction and business activities in Sabah and Sarawak regions.
“The group’s prospect is also well-supported by its healthy outstanding order book of about RM1.03 billion for its construction and road maintenance division which will provide earnings visibility over the next two to three years.”
Meanwhile, MIDF Research was of the view that CMS’ businesses spanning across the construction supply chain will continue to be a major beneficiary from the potential mega infra projects roll-out in the state of Sarawak and Sabah.
In addition, the research arm believed the development expenditure of RM9.6 billion allocated for the state of Sabah and Sarawak under Budget 2021 and the commitment of the Sarawak’s state government of an additional RM9.8 billion budget for the state alone with the majority of funds earmarked for developments would bode well with the group’s order book replenishment rate moving forward.