INVESTMENT HIGHLIGHTS

• PATAMI below the line

• Insipid cement and property segment’s contribution in PBT

• FYE18/FYE19 earnings forecast unchanged

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

3MFY18’s earnings below expectations. CMSB’s 3MFY18 PATAMI was above expectations at RM38.9m (+213.7%YoY) compared to the preceding period. It earnings corresponded with 13.5% of ours and 13.8% consensus’ of full year forecast respectively.

Insipid contribution from cement and property segment. The weak results culminates from the decrease of cement segment’s PBT of RM6.5m (-55.2%YoY) added by property segment’s insipid PBT of RM2.0m (-6.5%). The two key segments mentioned provided significant impact to CMSB’s bottom-line as development is still taking place in Sarawak.

FYE18/FYE19 earnings forecast unchanged. Nevertheless, we maintain our forecasts for FYE18/FYE19. Our earnings forecasts lagged expectations due to the slower progress billings from Pan Borneo Highway and slower order for aggregates. Considering that, we asses that it is premature to revisit our earnings assumptions for FYE18/FY19. It was quoted from the news that Sarawak’s Pan Borneo segment will continue hence it is a good sign that recovery is expected in upcoming quarters especially for cement and construction materials segment. This is because demand for aggregates would increase incrementally.

Recommendation. Altogether, we maintain our BUY recommendation with an SOP-based TP of RM4.62 per share. We have estimated that sentiments for construction companies would be negative pending announcements for big-ticket projects. Thus, we believe that the steep selling in CMSB’s shares suppressing its share price unveils the opportunity to increase exposure.

Source: MIDF Research - 16 May 2018