Stock Focus CMSB gains 1% on phosphate plant, analysts' upgrade

by **Cals** Thu 02 Jan 2014, 13:49

Stock Focus CMSB gains 1% on phosphate plant, analysts' upgrade

Business & Markets 2013

Written by Jonathan Gan at theedgemalaysia.com

Thursday, 02 January 2014 11:16

KUALA LUMPUR (Jan 2): Cahya Mata Sarawak Bhd (CMSB) rose as much as 1% after the firm said it has entered into a joint venture (JV) to build a RM1.04 billion integrated phosphate plant.

Analysts' upgrades have also supported gains in CMSB shares. At 11:01am, CMSB rose four sen to RM6.91 with 88,900 shares done. The stock had earlier gained as much as seven sen to RM6.94.

Alliance Research maintained its "strong buy" rating on CMSB with an unchanged target price (TP) of RM 7.57.

In a note, Alliance analyst Toh Woo Kim said CMSB shares remain undervalued despite the recent surge in the stock's price.

"Despite the recent surge in its share price, CMSB remains undervalued, trading at just 9.5x FY14 P/E (ex-net cash).

"We believe market is still under-appreciating the natural monopoly of CMSB's cement division which will not be affected by rising competition or hike in electricity tariff, and the value of its 20%-investment in OM Sarawak," Toh said.

Alliance has issued its note on news of CMSB's planned phosphate plant.

The plant is said to have an annual production capacity of approximately 500,000 tonnes and CMSB will own a 40% stake in the project.

Toh said given the competitive price of hydropower in Samalaju, Sarawak, Alliance believes the project will be earnings accretive to CMSB.

Meanwhile, RHB Research maintained its "buy" call on CMSB but revised its TP higher to RM8.57 from RM7.55 previously.

RHB analyst Ng Sem Guan said "CMSB's share price continues to inch higher, gaining 123.3% since our initiation in March 2013. As we are conservative on our valuations, we have decided to incorporate the
group’s 20% stake KKB Engineering and 25% stake K&N Kenanga into our SOP valuation, which bump ups our FV to MYR8.57".