KUALA LUMPUR (July 11): MIDF Research remained unmoved on its call and target price (TP) for Cahya Mata Sarawak Bhd after the termination of electricity supply to its subsidiary Cahya Mata Phosphate Industries Sdn Bhd’s (CMPI) phosphate production plant in Samalaju, Sarawak.
According to its research note on Tuesday (July 11), the termination has limited impact on Cahya Mata’s financials as CMPI has yet to commence commercial operations as it is still in the process of obtaining approvals and licences to begin selling. CMPI has 10,000 drums of phosphorus in its inventory.
MIDF Research maintained a “buy” call with an unchanged TP of RM1.50 based on a forward price-earnings (PE) of eight times to its financial year 2024 forecast (FY2024F) earnings per share (EPS) of 18.7 sen.
“We are making no changes to our forecasts for now as we await further clarity from management, which is expected to hold a briefing on this,” said MIDF on July 11.
MIDF also said that there may be a delay in the commercialisation of the phosphate plant due to the arbitration of the dispute which may take up to two years.
Nevertheless, it noted that Cahya Mata’s medium to long term outlook remained strong with the expected improvement in cement demand, especially with planned development projects including Indonesia’s upcoming new capital in Nusantara.
“It is currently building a new RM750 million clinker line at the integrated complex in Mambong, which will allow it to triple its clinker production capacity to 2.8 million tonnes annually.”
On July 10, the Court of Appeal dismissed CMPI’s bid for a preservation order to bar state utility firm Syarikat Sesco Bhd from terminating power supply to the plant.
Cahya Mata sought the preservation order to maintain status quo, pending its appeal against the Kuching High Court’s decision in June to dismiss its interim injunction application.
According to its Bursa filing, the Court of Appeal did not grant preservation order which then led Sesco to terminate the electricity supply to the plant at 12.30pm.
However, Cahya Mata said the power shutdown is not expected to have a material business, financial or operational impact on the group.
At noon break, its share price remained unchanged at RM1.07 with a market capitalisation of RM1.15 billion.
Read more:
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