Despite a bid with the court of appeal on preventing SESCO from cutting out electricity to its Phospates plant, Cahya Mata Sarawak Power failed to get a prevention order in place, hence the utility arm of Sarawak Energy has terminated the electricity supply to the plant in Samalaju.
MIDF sees the action as causing limited impact to the group limited impact as the phosphate subsidiary has yet to commence commercial operations. It is still in the process of obtaining the necessary approvals and licenses for it to begin selling. It has about 10,000 drums of phosphorus in its inventory.
However, there may be a delay in the commercialisation of Phosphates’ plant in Samalaju due to the arbitration of the dispute, which may take up to two years.
Sesco billed CMSB RM266m for cumulative electricity consumption shortfall and payment security shortfall as of 31 December 2022. On 11 May, it issued a default notice that the PPA with Phosphates was deemed terminated and that it would terminate the electricity supply to its plant. CMSB recognised a contingent liability of RM266m in its FY22 financial statements, arising from the PPA dispute
MIDF is making no changes to our forecasts for now as we await further clarity from management, which is expected to hold a briefing on this. Our TP is maintained at RM1.50, based on a forward PE of 8x to its FY24F EPS of 18.7 sen.
While reiterating a Buy call on the stock, MIDF’s optimism in CMSB remains as it medium to long term outlook remains strong with the expected improvement in cement demand, especially with the development projects that have been planned for the state and also Indonesia upcoming new capital in Nusantara. It is currently building a new RM750m clinker line at the integrated complex in Mambong, which will allow it to triple its clinker production capacity to 2.8m metric tonnes annually
