• The East Malaysia conglomerate. CMSB, being the direct proxy to Sarawak, is set to be the prime beneficiary of the forthcoming Sarawak state election in addition to the implementation of the Pan-Borneo Highway. It is also set to benefit from Sarawak Corridor of Renewable Energy (SCORE)-related development which had s trengthened CMSB’s core divis ions compris ing cement, construction materials & trading and construction & road maintenance segments.
• Incorporated in 1974, CMSB has successfully diversified its business competencies over the years into cement, construction material and trading, construction and road maintenance, property development, education and financial services. Meanwhile, the completion of acquisition of 50% stake in Sacofa (a tower infrastructure and telecommunication service provider) in Oct 15 is expected to contribute about 10% to FY16 earnings.
• Beneficiary of Ringgit strengthening. The recent Ringgit’s rally against USD and expectations of further improvement in 2H16 should bode well for its cement and building materials division (contributed over 60% to FY15 revenue) as most of its raw materials are transacted in USD.
• Poised to revisit RM5.16-5.43 zones after a brief sideways consolidation. CMSB’s share prices have corrected 19% from 52 -week high of RM6.00 (29 July 15) to close at RM4.84 yesterday. Share prices are likely to find a bottom near RM4.70, given the bottoming up hourly indicators and the formation of hammer candlestick in daily chart. A decisive breach above RM5.00 psychological barrier is crucial for a resumption of uptrend towards RM5.16 (200-d SMA) and our long term objective of RM5.43 levels. Cut loss at RM4.67.
• Attractive risk to reward ratio with 12.2% upside against 3.5% downside. All in, we see an attractive risk to reward ratio for investor with a theoretical entry price of RM4.84 given that the downside to the cut loss zone of RM4.67 is 17 sen (-3.5%) while the upside to the LT price objective of RM5.43 is 59 sen (+12.2%).

Source: Hong Leong Investment Bank Research - 18 Mar 2016