Review

• Excluding a net exceptional gain amounting to RM9.2mn, CMSB’s 9MFY23 core profit of RM69.7mn came in below expectations, accounting for 53.2% and 49.3% of our and consensus full-year estimates. The variance was mainly due to lower-than-expected profit contribution from property development as well as higher-than-expected loss incurred by the phosphate divisions.

• YoY, 9MFY23 core profit dropped 62.9% to RM69.7mn although revenue was 23.6% higher at RM868.1mn. The weaker bottom line was mainly attributed to softer earnings performance from road maintenance, property development, and phosphates divisions. On top of that, the group also saw lower profit contributions from associates following the disposal of OM Materials Sarawak last year. Nevertheless, the weaker earnings performance was cushioned by stronger earnings contributions from the cement and oiltools divisions.

• For the property development division, the PBT dropped by 75.1% to RM6.7mn from RM26.7mn a year ago due to slower sales of properties. Meanwhile, the PBT of the road maintenance division also fell by 53.0% to RM5.1mn from RM10.9mn a year earlier due to lower sales and lower gross profit margin. On the other hand, the phosphate division recorded a higher LBT of RM99.1mn, mainly due to commissioning and financerelated costs.

• QoQ, 3QFY23 core profit jumped 66.7% to RM20.8mn while revenue was 3.9% higher at RM301.9mn. The better earnings performance was largely due to higher contributions from the cement division.

Impact

• Maintain earnings forecasts pending an analyst briefing later.

Outlook

• We foresee the demand for building materials in Sarawak to remain robust, backed by local infrastructure projects such as Kuching Urban Transportation System, Sarawak-Sabah Link Road, and Baleh Dam.

Valuation

• We put our call Under Review, pending an analyst briefing later, with an unchanged target price of RM1.14/share based on SOP valuation.

Source: TA Research - 30 Nov 2023