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This article first appeared in The Edge Financial Daily on May 22, 2018

KUALA LUMPUR: The selldown of Cahya Mata Sarawak Bhd (CMS) shares continued yesterday as investors reacted negatively to speculation on the politically perceived counter.

About RM698 million of its market value was wiped out between May 18 and May 21, as the share price fell from RM2.48 to close down 56 sen or 22.58% at RM1.92 yesterday.

Bursa Malaysia suspended proprietary day trader (PDT) and intraday short selling (IDSS) activities of the group on both May 18 and May 21, after the last done price dropped by more than 15 sen or 15% from the reference price.

Bursa said PDT and IDSS activities will be enabled today at 8.30am.

As it is, CMS’ share price has been on a decline since markets reopened on May 14 after the May 9 general election.

On the first day of trading since the change in government, CMS’ counter shed 58 sen to close at RM3.55. However, it pared gains shortly after when the group on May 15 announced its results for the first quarter ended March 31, 2018 (1QFY18), of which it said net profit surged 50.7% to RM38.98 million year-on-year.

In a research note yesterday, RHB Research Institute said the sell-off in CMS has been overdone and is only temporary.

“This is because we think CMS’ traditional businesses are backed by its expertise and heavy investments in these units. We also believe that the group’s business model remains intact,” said RHB analyst Muhammad Syafiq Mohd Salam.

Management of CMS viewed the steep selldown as due to a few factors, which were outlined in a statement issued on May 20 by group chief executive officer Datuk Isaac Lugun.

These include the Bruno Manser Fund’s offer to share information with the new Pakatan Harapan government on Tun Abdul Taib Mahmud’s family as a basis for reopening of investigation, as well as the unblocking of the Sarawak Report website.

Additionally, management acknowledged that it could be due to a statement made by DAP which suggested for state road maintenance concessions in Sarawak to be awarded in an open tender format.

CMS said allegations against Abdul Taib’s family are not new and cast doubt on political will to prosecute while maintaining that the company had been professionally and independently managed.

It also pointed out that CMS has stepped up its compliance with sustainability and governance standards.

“CMS has evolved away from the Tun Taib family’s control with their stake down to 33.35% and institutions recognising the potential and the professional capabilities CMS now holding approximately over 35%. These include the Employees Provident Fund with 10.83%, Lembaga Tabung Haji with 9.24% and foreign institutions with 15% (as at April 2018).

RHB, which has maintained its “buy” call on CMS with a target price (TP) of RM4.57, said the management remained confident that its state road concessions will be renewed.

TA Securities analyst Chan Mun Chun also concurred that the selldown is temporary, but that there maybe some volatility to be seen over the next few days.

“The market has definitely overreacted. Valuation-wise, it is fine; there is nothing wrong with the company. Price-earnings-wise, it’s about eight times which is hardly seen but this would be an attractive time to buy. I believe it should rebound to normal levels of between RM3 and RM4 soon.” Chan told The Edge Financial Daily over the phone.

TA Securities also maintained its “buy” call, with a TP of RM4.10.

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