Investment Highlights

• 9MFY17 earnings came in mixed

• Cement and property segment improved

• FYE17/FYE18 earnings forecast remains intact

• Nevertheless, we maintain our BUY recommendation with a TP of RM4.62 per share

9MFY17 earnings came in mixed. CMSB’s 9MFY17 PATAMI of RM149.4m (+121.0%YoY) came in mixed - lower than ours but meeting consensus’ full year forecast estimates at 54.8% and 67.6% respectively. The deviation of from our 9MFY17 forecast of RM204.45m is attributable to our expectation of higher progress rate of Pan Borneo Highway.

Cement and property segment improved. From last quarter’s progress, CMSB’s Pan Borneo Sg. Awik - Bintagor (64.4km) development is still marginal Thus, we reckon that CMSB will be able to recognize more progress as we move on the 1QFYE18. As we have reasoned in our previous report, the cost structure efficiency plan was rolled out in the cement division. Consequently, the OP* of cement segment (RM82.1m, +6.8%YoY) accounting for 48.0% of TOP which improved its OP Margin by 3.4ppts. Another surprise improvement came in from the OP of property segment (RM29.2m, +189.1%YoY) accounting for 17.0% of TOP. OP Margin for property development of 22.8% increased by 5.8ppts from positive take-up rates for Bandar Samariang as we have estimated previously.

FYE17/FYE18 earnings forecast remains intact. In view of that, we maintain our forecasts for FYE17/FYE18. Although the earnings came in below of our forecasts, we reckon it is untimely to trim our earnings assumptions as the progress of Pan Borneo would accelerate in upcoming quarters.

Recommendation. Nevertheless, we maintain our BUY recommendation with SOP-based TP of RM4.62 per share.

Source: MIDF Research - 30 Nov 2017