Company Name: CAHYA MATA SARAWAK BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 5.00 |
KUALA LUMPUR: Cahya Mata Sarawak Bhd's (CMS) shares rose in the early session after its wholly-owned unit, Samalaju Industries Sdn Bhd (SISB), proposed to acquire an additional five per cent stake in OM Materials (S) Pte Ltd (OMS) from OM Holdings Ltd for US$18.45 million.
At 11 am, CMS's share price was up four sen to RM4.51 with 112,200 shares changing hands.
The acquisition, expected to complete by end-March this year, would increase SISB's stake in the ferrosilicon manganese alloy smelting plant in the Samalaju Industrial Park, Sarawak to 25 per cent with the remaining 75 per cent owned by OM Holdings.
Maybank Investment Bank views the deal as positive, saying it would enhance recurring income from CMS' investments in the Sarawak Corridor of Renewable Energy (SCORE).
"We estimate 3-5.5 per cent potential upside to CMS' financial years 2015-2017 earnings per share forecasts from the acquisition," it said in a research note today.
In addition, it said OM Holdings would redeploy the proceeds from this disposal for the development of OMS phase II to further enhance earnings.
Maybank Investment said despite the lacklustre ferrosilicon price, OMS would still be able to remain profitable due to its low cost structure as it leverages on the low energy cost in Sarawak.
The investment bank has reiterated its 'buy' call on CMS with a target price of RM5.00. - Bernama
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