INVESTMENT HIGHLIGHTS

• RM40.7m earnings booked in 1QFY19

• During the quarter, operating profit recorded respectable growth

• Positive trend shown in cement division

• Construction and road maintenance down -15.0%yoy

• We make no changes to earnings estimates

• Maintain BUY call at TP of RM4.13

RM40.7m earnings booked in 1QFY19. During the period, CMSB reported PATAMI of RM40.7m. Compared to last year, the amount booked was higher by a modest +4.4%yoy. The 1QFY19 earnings corresponded with 15.6% and 14.7% of ours and consensus’ yearly estimates. We believe this is broadly within our assumption as, historically, CMSB’s earnings generally skewed toward the second half of financial year.

During the quarter, operating profit recorded respectable growth, increasing by +83.6%yoy. This was on the back of improved performance in cement, construction materials and property developments. By extension, growth was seen the highest in property developments at >+100% due to mixed factors, namely land sale exercise, improved sale condominium units and better rental income from unsold apartments. Stripping out the land sale quantum of RM10.9m at PBT level, we were left with RM4.2m PBT for the property segment. It is noteworthy that growth was still strong at >+100%, thanks to the improved number of condominium units sold.

Positive trend shown in cement division. It reported +67.0% higher PBT of RM11.0m in 1QFY19 compared to RM6.6m in the corresponding period last year. This was due to +11.0% higher revenue recognized, coupled with lower overhead cost resulting from 24% higher production volume and lower repair cost. The annual maintenance shutdown at the clinker plant was performed in January 2019, which we understand was relatively shorter in comparison to the previous year. During the period, sales volume for both cement and concrete products has increased by +9% and 70% respectively. The sales volume growth was highly encouraging, in the light of oversupply and overcapacity issues in Peninsular Malaysia.

Source: MIDF Research - 16 May 2019