INVESTMENT HIGHLIGHTS

• Results below expectations with mixed signals

• But Higher PBT contribution from construction and property recorded

• Estimates for FYE17/FYE18 remains unchanged

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

FY17 earnings below expectations… CMSB’s FY17 PATAMI went below expectations at RM215.2m (+2.6%YoY) compared to the preceding period. It earnings matched 79% of ours and 94% consensus’ of full year forecast respectively. The mixed deviation from ours and Street’s FY17 forecast is attributable to our estimation which forecasted higher progress billings for CMSB’s construction segment and improved sales from construction materials.

…but construction and property segments PBT improved. Despite the lower-than-expected results, construction and property segment PBT improved. FY17 Construction segment’s PBT of RM90.2m (+5.6%) which contributed to 30.3% of CMSB’s total PBT improved due to the billings form Pan Borneo highway and Miri and Marudi road rehabilitation works. Furthermore, the property division’s PBT of RM47.2m (+100.9%YoY) which adds the total PBT by 15.9% flitted on the back of higher sales from Rivervale, Raintree and improved rental from Bandar Samariang’s Mydin Hypermarket. The improvement is a positive sign on CMSB’s earnings momentum despite the insipid progress of the Pan Borneo Highway.

FYE18/FYE19 earnings forecast unchanged. Nevertheless, we maintain our forecasts for FYE18/FYE19. Although, our earnings forecast did not hit the target we believe that it is due to the slower progress cycle and billings from Pan Borneo Highway and construction materials order is not picking up yet. Considering that, we asses that it is premature to revisit our earnings assumptions for FYE18/FY19. We believe that FYE18 would be better year for construction segment to lift CMSB’s total PBT contribution by another 5.5% from the higher construction progress for Pan Borneo and Baleh Dam’s cement supply.

Recommendation. We maintain our BUY recommendation with an SOP-based TP of RM4.62 per share.

Source: MIDF Research - 26 Feb 2018