27 February 2017 | FY16 Results Update
Maintain BUY
Cahya Mata Sarawak Berhad
Showing the Dint of Profitability
Adjusted Target Price (TP): RM4.62
(From RM4.36)
INVESTMENT HIGHLIGHTS
•
Mixed FY16 earnings
•
Earnings dragged from lack of catalysts
•
Estimates for FYE17/FYE18 remains intact
•
RETURN STATS
Price (24 Feb 2017)
RM4.10
Nonetheless, we maintain our BUY recommendation with an
Target Price
RM4.62
adjusted TP of RM4.62 per share
Expected Share Price
Return
+12.7%
Expected Dividend Yield
+3.5%
FY16 earnings below expectations. CMSB’s FY16 PATANCI went
below expectations at RM209.8m (-15.4%YoY) compared to the
preceding period. However, its FY16 earnings came in mixed; lower than
our estimate but higher than consensus’ registering 81.0% of ours and
124.1% consensus’ of full year forecast respectively. The deviation of
from our FY16 forecast of RM259m compared to FY16’s earnings
amounted to RM49.2m (-18.9%) is attributable to our higher estimates
of progress billing for Pan Borneo works and cement sales.
Expected Total Return
STOCK INFO
KLCI
1,683
Earnings dragged by lack of catalysts. Insipid FY16 results are
attributable to decline in revenue from all three major segments of
construction, cement and roadworks. Recall that CMSB (JV Binapuri)
won the Pan Borneo Sarawak Sg. Awik to Bintagor package for a period
of 48-months starting from July, 2016. Hence, we are not overly concern
with the current results as the project is still at its infancy. Furthermore,
developments in the state of Sarawak are still on-going progressively
albeit a change in the state’s political leadership.
Bursa / Bloomberg
FYE17/FYE18 earnings forecast remains intact. Having said that,
we maintain our forecasts for FYE17/FYE18. While FY16 earnings
dropped against FY15’s, CMSB’s quarterly earnings of RM130.2m
(+53.5% YoY) illustrate a dint of rising profitability. Considering that, we
reckon it is premature to revisit our earnings assumptions. The slight
decline in revenue for cement segment of RM563m (-6.3% YoY) and the
improvement of its EBIT of RM105.3m (+2.1%YoY) elucidates cyclical
impact of cement demand but tapered by the acumen of management’s
cost reduction by managing plant capacity. Meanwhile property
development’s surprising revenue of RM23.5m (+18.7% YoY) is relieving
as it provides clarity in the direction of the segment which has been very
weak for the past quarters. In sum, we reckon that CMSB will be able to
comfort a ‘hard landing’.
Market cap. (RM’m)
Recommendation. Hence, we maintain our BUY recommendation with
SOP-based adjusted TP of RM4.62 per share.
+16.2%
Board / Sector
2852/ CMS MK
Main /
Construction
Syariah Compliant
Yes
Issued shares (mil)
1074
Par Value (RM)
1.00
4404.9
Price over NA
2.1
52-wk price Range
RM3.17– RM5.07
Beta (against KLCI)
0.85
3-mth Avg Daily Vol
0.86m
3-mth Avg Daily Value
RM3.44m
Major Shareholders (%)
Majaharta S/B
12.54
EPF
11.60
Lejla Taib
10.33
Sulaiman Abdul Rahman
8.23
MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK
Kindly refer to the last page of this publication for important disclosures
MIDF RESEARCH
Monday, 27 February 2017
INVESTMENT STATISTICS
FYE DEC (RM m)
2014
2015
2016
2017F
2018F
Revenue
1651.7
1765.1
1552
1857.7
1904.2
Operating profit
284
309
325.6
342.5
359.6
Net Profit
208.8
246.1
209.8
272.6
286.3
EPS (Sen)
0.21
0.23
0.16
0.18
0.19
EPS (Growth)(%)
1
9
-43
25
5
PER
18
22
25
21
20
Source: MIDFR
SOP VALUATION
Business Division
Valuation Method
Stake (%) WACC(%) PER (X) Equity Value (MYR'm)
Construction Materials
DCF
100
8.0
Cement
DCF
100
8.0
Construction and Road Works
DCF
51
8.0
Total Construction Segment
3661.00
K&N Kenanga
DCF
OM Sarawak
PER
25
8
90
Sacofa
PER
50
15
850
KKB Eng. Bhd
PER
10
95
Property
RNAV (60% Discount)
Total Equity Value
8.0
100
80
187.2
4963.20
Share Base
1074
Share Price (MYR)
4.62
Source: MIDFR
DAILY PRICE CHART
Fadhli Dzulkifly
[email protected]
03-2772 8462
Source: Bloomberg, MIDFR
2
MIDF RESEARCH
Monday, 27 February 2017
FY16 RESULTS SUMMARY
FYE Dec (RM'm)
4Q16
3Q16
4Q15
Revenue
450.2
356.0
508.3
QoQ
Chg
26.5%
Other income
32.0
88.0
6.3
Finance cost
-3.1
-2.9
124.3
5.3
Pre-tax profit
YoY Chg
12M16
12M15
YoY Chg
-11.4%
1,552.0
1,788.0
-13.2%
-63.6%
407.1%
44.4
25.2
76.2%
-1.3
6.9%
138.5%
-10.6
-4.0
165.0%
83.5
96.3
48.9%
29.1%
324.6
346.5
-6.3%
8.4
21.5
-36.9%
-75.3%
-35.1
37.0
-194.9%
141.7
94.7
115.3
49.6%
22.9%
302.1
381.6
-20.8%
Taxation
-26.3
23.1
-16.2
-213.9%
62.3%
-84.2
83.9
-200.4%
Minority interest
13.9
12.8
21.0
8.5%
33.8
48.2
54.3
-11.2
102.3
59.8
78.0
71.1%
31.2%
209.8
248.1
-15.4%
9.5
5.5
7.3
30.2%
15.8
22.6
-30.3%
4Q14
4Q13
3Q14
+/- ppts
12M16
12M15
+/- ppts
Operating margin
27.6%
23.5%
18.9%
72.8%
+/ppts
4.2
8.7
20.9%
19.4%
1.5
Pre-tax margin
31.5%
26.6%
22.7%
4.9
8.8
19.5%
21.3%
-1.9
PATAMI margin
22.7%
16.8%
15.3%
5.9
7.4
13.5%
13.9%
-0.4
Effective tax rate
18.6%
-24.4%
14.1%
43.0
4.5
27.9%
-22.0%
49.9
Revenue
4Q16
12M16
12M15
YoY Chg
Cement
148.5
Segmental breakdown
QoQ
3Q16
4Q15
YoY Chg
Chg
139.3
157.3
6.6%
-5.6%
563.0
600.8
-6.3%
Construction Materials
172.8
131.6
203.4
31.3%
-15.0%
581.0
712.0
-18.4%
Construction/Road
97.2
83.1
129.8
17.0%
-25.1%
367.8
459.4
-19.9%
Property Development
45.6
17.8
35.8
156.2%
27.4%
104.6
90.0
16.2%
Samalaju
0.0
0.0
7.5
-
-
-
16.8
-
Strategic Investments
2.0
2.5
1.8
-20.9%
11.1%
9.50
8.9
6.7%
Others
14.2
12.1
4.0
17.4%
255.0%
45.0
22.9
96.5%
TOTAL
480.3
356.0
508.3
-5.5%
1,552.0
1,788.0
-13.2%
Operating Income
4Q16
3Q16
4Q15
YoY Chg
12M16
12M15
YoY Chg
Cement
28.0
35.2
13.9
34.9%
QoQ
Chg
-20.5%
101.4%
105.3
103.1
2.1%
Construction Materials
32.1
26.4
35.2
21.6%
-8.8%
106.7
107.9
-1.1%
Construction/Road
27.7
19.1
44.2
45.0%
-37.3%
85.4
133.2
-35.9%
Property Development
13.4
3.0
10.2
346.7%
31.4%
23.5
19.8
18.7%
-
-
-2.8
-
-
-
2.1
-
Strategic Investments
0.0
-0.8
-0.9
-105.0%
-104.4%
-2.5
-2.0
25.0%
Others
28.8
1.7
0.020
1594.1%
N/A
19.10
0.0
N/A
TOTAL
130.2
84.8
99.8
30.5%
337.3
364.3
-7.4%
Op/Inc Margin
4Q16
3Q16
4Q15
+/- ppts
12M16
12M15
+/- ppts
Cement
18.9%
25.3%
8.8%
53.5%
+/ppts
-6.4
10.0
18.7%
17.2%
1.5
Construction
18.6%
20.1%
17.3%
-1.5
1.3
18.4%
15.2%
3.2
Roadworks
28.5%
23.0%
34.1%
5.5
-5.6
23.2%
29.0%
-5.8
Operating profit
Share results of associates
PATANCI
FD EPS (sen)
Samalaju
Source: MIDFR
3
MIDF RESEARCH
Monday, 27 February 2017
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for
distribution only under such circumstances as may be permitted by applicable law.
Readers should be fully aware that this report is for information purposes only. The opinions contained
in this report are based on information obtained or derived from sources that we believe are reliable.
MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or
implied, as to the accuracy, completeness or reliability of the information contained therein and it
should not be relied upon as such.
This report is not, and should not be construed as, an offer to buy or sell any securities or other
financial instruments. The analysis contained herein is based on numerous assumptions. Different
assumptions could result in materially different results. All opinions and estimates are subject to change
without notice. The research analysts will initiate, update and cease coverage solely at the discretion of
MIDF AMANAH INVESTMENT BANK BERHAD.
The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have
interest in any of the securities mentioned and may benefit from the information herein. Members of
the MIDF Group and their affiliates may provide services to any company and affiliates of such
companies whose securities are mentioned herein This document may not be reproduced, distributed
or published in any form or for any purpose.
MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Total return is expected to be <-15% over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
4