This article first appeared in The Edge Financial Daily, on November 8, 2016.
Cahya Mata Sarawak Bhd (Nov 7, RM3.70) Initiate coverage with a buy rating and target price (TP) of RM4.36: Earnings of Cahya Mata Sarawak Bhd (CMSB), a Sarawak-based cement manufacturer, are driven by the key economics theme in Sarawak. Unwavering cement prices in East Malaysia, an increasing population and a rise in infrastructure projects provide ample opportunity growth for CMSB in the long haul.
We believe CMSB’s operating income and revenue growth is correlated with Sarawak’s construction gross domestic product (GDP).
CMSB’s stable revenue and operating income beckon a positive growth storyline ahead. Its strategic positioning in Sarawak’s development narrative is evidential through its stable historical five-year revenue and operating profit compound annual growth rates (CAGRs) of 12.3% and 9% respectively.
Hence, its long-term performance should be viewed conjunctively against transient blips, and comparatively against its peers on the FBM KLCI and Kuala Lumpur Construction Index. The upside to its relative valuation balances downside risks.
Balancing the risk factors affecting CMSB and the “white space” for potential growth, we found that its key strengths will overcome insipid growth in the property development, phosphate and metal smelting business segments.
Relative valuations of CMSB’s peers and the FBM KLCI indicated its steady strength in recording the strongest CAGR with very appealing fundamentals, such as a considerable earnings per share growth of 18%.
We initiate coverage of CMSB with a “buy” recommendation and TP of RM4.36 per share, premised on our sum-of-parts valuation. — MIDF Research, Nov 7
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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