CMS is well-supported by its healthy outstanding order book of about RM1.23 billion in for its construction and road maintenance division which will provide earnings visibility over the next two to three years.
KUCHING: Analysts believe Cahya Mata Sarawak Bhd’s (CMS) revenue and earnings prospects remain healthy moving forward as it is poised to benefit from Sarawak’s mega infrastructure projects in the foreseeable future
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) posited that CMS’ revenue and earnings prospects remain healthy moving forward in anticipation of recovery in second half of financial year 2020 (2HFY20) earnings following the resumption of construction and business activities and increased workforce capacity at work sites as seen during the Recovery Movement Control Order (MCO) period.
“The group’s prospect is also well-supported by its healthy outstanding order book of about RM1.23 billion in for its construction and road maintenance division which will provide earnings visibility over the next two to three years,” MIDF Research said following the release of CMS’ first nine months of FY20 (9MFY20) results.
To recap, for its third quarter (3Q) financial results for the three months ended September 30, 2020, CMS reported profit before tax (PBT) of RM81.7 million which was a 255 per cent improvement as compared to PBT of RM23 million in the preceding 2Q ended June 30, 2020 (2Q20).
According to the group’s statement, the construction and road maintenance division’s mid-term prospects are well supported by CMS’ outstanding order book of RM1.11 billion as at September 30, 2020.
CMS highlighted that the Division is well positioned to capitalise on opportunities to participate in major infrastructure projects in Sarawak including the Coastal Road and Second Link Road Projects.
“Meanwhile, we are of the view that CMS could continue to be a beneficiary from the potential mega infra projects roll-out in the state of Sarawak and Sabah (i.e. Sarawak-Sabah Link Road, Coastal Road, Trans-Borneo Highway project, Sarawak Water Supply Master Plan and Water Grid, Sarawak Petrochemical Hub) in the foreseeable term,” the research arm also opined
In addition, the research arm believed the development expenditure of RM9.6 billion allocated for the state of Sabah and Sarawak under Budget 2021 and the commitment of the Sarawak’s state government of an additional RM9.8 billion budget for the state alone with the majority of funds earmarked for developments would bode well with the group’s order book replenishment rate moving forward.
On the other hand, AmInvestment Bank Bhd (AmInvestment Bank) was mindful of the potential threat to the market dominance of existing players in the construction and building material sector in Sarawak on the back of an altered political landscape in Malaysia after the 14th General Election.
“Increased competition could put a dent on CMS’ prospects of winning new construction jobs and concessions, as well as sustaining high margins for its construction, road maintenance and cement businesses,” AmInvestment Bank said.
The post CMS poised to benefit from Sarawak’s mega infra projects appeared first on Borneo Post Online.
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