KUALA LUMPUR (April 4): Cahya Mata Sarawak Bhd or CMS (KL:CMSB) climbed to its highest in 31 months in active trade and was among the top gainers on Bursa Malaysia on Thursday.

The stock rose as much as 19 sen or 16% to RM1.42, its highest since November 2021. The counter closed at RM1.40, valuing the company at RM1.5 billion on Bursa Malaysia. Trading volume totalled 56.4 million shares, 15 times the 200-day moving average.

On the technical chart, CMS has broken out from the bullish flag pattern a few sessions ago, putting the stock on an uptrend, said Rakuten Trade Sdn Bhd equity research vice president Thong Pak Leng.

Shares of CMS — the sole manufacturer of cement in Sarawak — have risen 29% so far this year buoyed by resurgence in construction activities in Malaysia and the government’s commitment to raising spending on infrastructure and development of Sarawak.

The federal government has allocated RM5.8 billion for development in Sarawak in Budget 2024 and RM7.4 billion for the second phase of the massive Sarawak-Sabah Link Road connecting the two states.

Analysts are broadly bullish on CMS, which is also involved in construction, road maintenance and property development.

The stock currently has three "buy" calls, one "hold" recommendation and only one "sell" rating, according to Bloomberg. The current stock price has also exceeded the consensus 12-month target price of RM1.27.

The consensus forecast is for CMS’s net profit to be at RM136.67 million for the year ending Dec 31, 2024 (FY2024), a gain of 18.7% from RM115.13 million in FY2023.

This means CMS's 1QFY2024 net profit of RM38.25 million accounted for 28% of the full-year consensus earnings forecast.

According to the forecast, CMS’s earnings will further grow to RM169.33 million in FY2025 and RM173.67 million in FY2026.

The company's net profit fell 10.1% to RM38.25 million for the first quarter of FY2024 from RM42.56 million a year earlier, mainly on lower contribution from its cement division due to slow construction activities attributed to bad weather. Quarterly revenue saw a marginal 0.6% increase to RM277.37 million from RM275.67 million.

MIDF Research, which has a “buy” call for CMS with a higher target price of RM1.38 (RM1.32 previously), said CMS is well-positioned to ride on the upside amid the pick-up in construction activity in Sarawak.

“In light of the upcoming developments that are expected in Sarawak which will drive stronger construction job flows, we believe CMS is well-positioned to ride on this upside as it is currently the only cement producer in the state and the main supplier,” it said in a note dated May 24.

“We expect ongoing projects such as the Pan Borneo Highway and the upcoming Sabah-Sarawak Link Road (Phase 2) to further improve demand,” the research house added.

MIDF Research expects CMS to deliver a full-year net profit of RM139.3 million for FY2024 and RM164.1 million for FY2025

TA Securities believes demand for building materials in Sarawak will remain strong. This is particularly true for cement, which is supported by local infrastructure projects such as the Kuching Urban Transportation System, the Sarawak-Sabah Link Road and the Baleh Dam.

TA Securities expects CMS to post a net profit of RM121.8 million for FY2024, rising further to RM146.5 million in FY2025 and RM152.1 million in FY2026.

TA Securities, however, downgraded the stock to "sell", from " neutral", as the stock is fairly valued considering the recent strength in its price.

“Therefore, we recommend that investors take profits at this juncture,” said the research house.

“After rolling forward the valuation base year to CY2025 earnings, we have arrived at a new target price of RM1.19 (from RM1.11),” it added.

Former Sarawak governor Tun Abdul Taib Mahmud’s daughters, Jamilah Hamidah Taib and Datuk Hanifah Taib-Alsree, control a 12.55% stake in CMS through Majaharta Sdn Bhd. A 10.33% stake is in the name of their late mother Puan Sri Laila Taib, and Taib’s sons have individual shareholdings in the company — with Datuk Seri Mahmud Abu Bekir Taib holding a 0.5% stake and Datuk Seri Sulaiman Abdul Rahman Abdul Taib holding 0.63%

Collectively, the Taib family has an equity interest of about 24% in the group.

This is followed by Lembaga Tabung Haji (6.8%), Sarawak Economic Development Corp (5.67%) and Norges Bank, which manages Norway's Government Pension Fund Global (5%).

Apart from CMS, Sarawak-based Naim Holdings Bhd (KL:NAIM) and its subsidiary Dayang Enterprise Holdings Bhd (KL:DAYANG) have been rising to multiple years high.

Property and construction player Naim Holdings closed at a more than seven-year high of RM1.40, after rising 11 sen or 8.53%. At RM1.40, the stock has a market capitalisation of RM701 million. The stock has gained more than 70% since the beginning of this year.

Dayang, in which Naim holds a 24.22% stake, soared to an all-time high of RM3.09 on Thursday. Dayang is among the top gainers on Bursa Malaysia as it closed higher by 45 sen or 17% from Wednesday’s closing price of RM2.64. The oil and gas firm has surged 93% year-to-date.

Naim Holdings is linked to Datuk Amar Abdul Hamed Sepawi, who is a cousin to the late Abdul Taib, with a direct stake of 6.5% and indirect stake of 14.68%.

Meanwhile, Dayang’s 63.53%-owned subsidiary Perdana Petroleum Bhd (KL:PERDANA) saw its share price close higher by 3.5 sen or 9.5% at 40.5 sen, giving the offshore support vessel operator a market capitalisation of RM900 million. Year to date, the stock has more than doubled from 20 sen.

Sarawak-based steel fabrication company KKB Engineering Bhd (KKB), in which CMS holds a 17.9% stake, closed eight sen or 4.5% higher at RM1.84. At RM1.84, the company has a market capitalisation of RM531 million. Year to date, the stock has gained 25%.

Another Sarawak-based construction and property firm Zecon Bhd (KL:ZECON) saw its share price rise two sen or 4.2% to 50 sen, its highest level since May 2021. At 50 sen, the company has a market capitalisation of RM74 million. Year to date, the stock has risen 23%.