CMSB rises 4% on telco business venture


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KUALA LUMPUR (April 3): Shares in Cahya Mata Sarawak Bhd (CMSB) rose as much as 18 sen or 4% in the morning trades after the group announced its plan to venture into the telecommunication infrastructure business. 

At 10.15am, CMSB (Fundamental: 3.00; Valuation: 1.50) was up 3.11% or 14 sen to RM4.46 with 668,900 shares done. It had earier risen as much as 17 sen to RM4.67.

CMSB's principal activity is cement manufacturing, construction materials, trading, construction, road maintenance, property development, financial services, education and other services. 

The company announced yesterday that it is acquiring a 50% stake in Sarawak-based telecommunications infrastructure and services company Sacofa Sdn Bhd for RM186.79 million or RM4.40 per share.

In a note to client today, AllianceDBS Research upgraded the stock to Buy from Hold and lifted its earnings projection for the financial year 2016 and financial year 2017 by 13%. 

"We expect this acquisition to be completed by second half of this year and contribute to CMSB earnings starting financial year 2016 (FY16)," it said. 

According to the firm, CMSB is expected to generate some RM1.715 billion in revenue and RM309 million in net profit for the FY16.

In FY17, CMSB is projected to pull in RM1.79 billion in revenue and RM316 million in net profit. 

Following the earnings revision, the firm also raised its sum-of-parts (SOP)-based target price (TP) to RM5.15, implying 14.8 times financial year 2016 price earnings per share (FY16 P/E) and 2.2 times financial year 2016 price to book value (FY16 P/B). 

"We continue to like CMSB as a proxy to the robust infrastructure development activities in Sarawak," it said. 

Meanwhile, Maybank Investment Bank Bhd reiterated its Buy call on CMSB and put their target price of RM4.80 under review. 

"Overall, we are positive on the acquisition as it would further enhance the group's recurring income base. 

"Based on Sacofa's financial year 2013 (FY13) net profit of RM52 million, which we expect to be sustainable, the potential enhancement to our FY15, FY16 and FY17 net profit forecasts for CMSB is 4, 6.5 and 7.9% respectively," Maybank IB said. 

(Notes: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)