Cahya Mata Sarawak (CMS) is the best proxy to the Sarawak Corridor of Renewable  Energy  (SCORE).  Its  associate  OMS  and  its  phosphate project  under  MPA  are  set  to  benefit  from  attractive  power  tariffs.  In addition to SCORE-driven growth, we believe its  subsidiary  SPD  could offer  more  upside.  We  expect  the  clinker  business  to  turn  around  in FY13 once the plant is operational. Maintain  BUY, with our SOTP-based MYR7.55 FV offering a 20.8% upside.

• Sarawak-based  conglomerate.  Cahya  Mata  Sarawak  (CMS)  is  a professionally-managed conglomerate  based in  Sarawak. The initiatives rolled  out  by  SCORE  should  benefit  the  group’s  existing  cement, construction  materials,  construction,  road  maintenance  and  property business divisions.
• Get  set  to  SCORE.  The  key  benefit  of  SCORE  is  the  availability  of attractive power tariffs (hydropower) to heavy industries. Construction on Phase  1  of  power-intensive  smelting  project  by  20%-owned  OM Materials  (Sarawak)  (OMS)  is  more  than  40%  complete,  with  full commissioning  expected  from  mid-2014.  The  group’s  Malaysian Phosphate Additives SB (MPA) project  is progressing well and the 51%-owned  Samalaju  Property  Development  SB  (SPD)  unit  could  offer additional  upside.  We  believe  that  the  current  peak  occupancy  at  its workers  lodge  will continue  for  the  next  two  years  and  the  scale  of  its property  developments  in  Samalaju  could  be  larger  and  be  completed earlier than we estimated.
• Cement division an immediate catalyst.  The group’s logistics prowess allows  it  to  maintain  its  tight  grip  on  Sarawak’s  cement  market.  The group’s clinker unit, which has seen stable operations since March 2013, is on track  for  strong performance after  returning to the black in 2Q13. The unit incurred a MYR29m loss in FY12 due to a shutdown. We expect efficiency to improve and production to grow from FY14 onwards.
• BUY,  with  SOTP-based  MYR7.55  FV.  CMS’s  valuation  remains undemanding,  while it has  solid fundamentals  and sound business plan. Our conservative SOTP-based FV of MYR7.55  implies 1.2x FY14 P/BV and a 10.3x FY14 P/E (excluding its net cash position).

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Source: RHB