Review

• Excluding a net exceptional loss amounting to RM26.0mn, CMSB’s FY23 core profit of RM141.1mn came in above expectations, accounting for 107.6% and 128.3% of our and consensus full-year estimates. The positive variance was mainly due to higher-than-expected profit contribution from the cement division.

• The group proposed a first and final dividend of 2.0sen/share (FY22: 3.0sen/share).

• YoY, FY23 core profit leapt 29.4%, in line with a revenue growth of 18.8% to RM1.2bn. This improvement in the bottom line primarily resulted from the contribution from the cement division thanks to higher sales amidst an easing input costs environment. That said, the strong segmental earnings growth was partially offset by reduced earnings across the road maintenance, property development, and phosphates divisions. Furthermore, the contribution from associates plummeted by 84.8% following the disposal of OM Materials Sarawak last year.

• For the property development division, the LBT stood at RM2.2mn from a PBT of RM33.2mn a year ago due to slower sales of properties and no land sales. Meanwhile, the PBT of the road maintenance division also fell by 20.2% to RM13.6mn due to reduced sales and lower gross profit margin. On the other hand, the phosphate division’s LBT widened to RM156.7mn (FY22: RM61.3mn), mainly due to commissioning and financerelated costs.

• QoQ, 4QFY23 core profit more than tripled to RM76.8mn while revenue was 10.2% higher at RM332.7mn. The better earnings performance was largely due to higher contributions from the cement division.

Impact

• Maintain earnings forecasts pending an analyst briefing later.

Outlook

• We believe the demand for building materials in Sarawak should remain intact, especially towards cement, as supported by local infrastructure projects, namely the Kuching Urban Transportation System, SarawakSabah Link Road, and Baleh Dam.

Valuation

• We place our call Under Review, pending an analyst briefing later, with an unchanged target price of RM1.11 based on SOP valuation.

Source: TA Research - 27 Feb 2024