KUALA LUMPUR (Dec 18): AllianceDBS Research has upgraded Cahya Mata Sarawak Bhd (CMSB) to “Buy” at RM3.75 with a higher target price of RM4.30 (from RM4) and said the company saw strong performance by key divisions amid robust development activities in Sarawak.

In a note Thursday, the research house said CMSB’s cement division was operating at full capacity, while margins had improved following the 5-9% average selling price hike early this year.

“The construction materials and road maintenance divisions have been posting record profits amid robust construction activities and infrastructure development in the state.

“This will persist in 2015 as the Sarawak state government may increase infrastructure spending ahead of the state election in 2016,” it said.

AllianceDBS Research said it imputed lower coal cost for the cement division, albeit the impact was partly offset by the weaker ringgit.

The research house said its revised forecasts indicate strong 3-year earnings CAGR of 16% per annum for CMSB over FY14-16F.  

“The share price has corrected by 25% from its recent peak and is now at an attractive entry level for investors.

“The company’s fundamentals are stable with limited downside risk,” it said.

At 10.23am, CMSB rose 2.67% or 10 sen to RM3.85.