Maybank Investment Bank has made a “Buy” recommendation call for Cahya Mata Sarawak with a target price of RM1.84.
It said that the management is optimistic, expecting CMS’ traditional core businesses to benefit from higher development activities in Sarawak while its strategic investments – MPAS and OMS which would fire up in 2022.
The investment bank said that after almost a 2-year delay due to technical and commissioning issues, exacerbated by the pandemic, MPAS Phase 1 plant would start firing all its furnaces in 2Q22 and commission in phases from YE2022 till early-2023.
The investment bank said that the contracted sales are>80%. At OMS, 4 of its 16 furnaces will be converted this year, to an eventual mix of 6 furnaces producing FeSi, 8 Mn Alloy, and 2 MetSi (2021: Only 12 furnaces were in operation with 6 producing FeSi, and 6 Mn Alloy). Overall production run rate is expected to slow in the near term before recovering in the latter part of 2022.
Maybank said that CMS is the beneficiary of construction activities in Sarawak and the only cement producer and largest construction materials supplier in Sarawak.
It said that its strategic investments in ferrosilicon & manganese alloys smelter (via 25%-OMS) and integrated phosphate complex (via 60%-MPAS) offer long-term growth prospects.
The investment bank said that its ICT operations (under 50%-SACOFA) are expected to benefit from Sarawak’s push for a fully digital economy. ▪
