KUCHING: Cahya Mata Sarawak Bhd’s (CMS) first major job win since 2009 consisting of the construction contract to design and build the Sarawak Museum Campus and Heritage Trail in Kuching could in analysts’ view be a prelude to more wins.
In an announcement on Bursa Malaysia, CMS said that PPES Works (Sarawak) Sdn Bhd (PPES), a subsidiary company of CMS Works Sdn Bhd which in turn is a wholly owned subsiary company of CMS had entered into a “Design and Build and Negotiated Contract” with the Government of Sarawak for the proposed Sarawak Museum Campus and Heritage Trail, Kuching, at a total contract sum of RM308 million.
CMS noted that the project comprises the design, construction, fitting out and exhibitory stable for a new world class museum and an adjoining annexe building with a combined total floor space of approximately 30,000 m2.
“The project also includes a heritage trail in central Kuching as well as the period conservation and exhibitory stable for the three existing historical museum buildings and of a pavilion.
“The overall duration of the contract is 60 months. The project is expected to be completed by the first quarter of 2020,” the group said.
According to the research arm of Maybank Investment Bank Bhd (Maybank IB Research), although CMS’ construction arm was established since 1990 and has a strong track record in constructing major infrastructures and buildings in Sarawak, the group has shifted its focus to road construction over the last few years.
“Hence, this contract represents its first major construction job win since 2009, lifting its outstanding orderbook significantly by 51 per cent to an estimated RM908 million,” the research arm said.
Assuming a gross margin of six per cent, Maybank IB Research forecasted a net profit contribution of RM14 million into 2020.
It noted that this translates into earnings per share (EPS) of 1.3 sen to be recognised overthe next five years.
“We maintain our forecasts as the earnings impact is minor,” it added.
Nevertheless, Maybank IB Research noted that this could be a prelude to more construction job wins in the near-term, especially that relating to the Pan Borneo Highway and Sarawak Corridor of Renewable Energy (SCORE).
Meanwhile, the research arm said that CMS’ cement and construction materials businesses are key beneficiaries of the growing construction activities driven by the upcoming Sarawak state election, Pan Borneo Highway works and 11th Malaysia Plan (11MP).
As such, Maybank IB Research maintained ‘buy’ on the stock while its RM5.00 per share sum of parts-target price is under review pending completion of CMS’ acquisition of Sacofa Sdn Bhd.
KUCHING: Adding telco infrastructure provider Sacofa Sdn Bhd (Sacofa) to Cahya Mata Sarawak Bhd’s (CMS) portfolio will further enhance the latter’s recurring income base, say analysts at Maybank Investment Bank Bhd (Maybank IB Research).
“Overall, we are positive on the acquisition as it would further enhance CMS’ recurring income base,” it estimated in an April 3 report. “Based on Sacofa’s FY13 net profit of RM52 million — which we expect to be sustainable — the potential enhancement to our FY15, FY16 and FY17 net profit forecasts for CMS is four per cent, 6.5 per cent and 7.9 per cent respectively.”
To note, Sacofa’s FY13 revenue comprises rental proceeds from telecommunication towers leased out to telcos at about 67 per cent, bandwidth services (32 per cent), and fibre-optic network rentals (one per cent).
Over the years, Sacofa has constructed new telco towers across Sarawak to cater to the demand from mobile operators. Bandwidth usage has also risen in tandem as agreements were signed with the telcos to provide nodes fiberisation to their sites in order to support higher mobile internet speed such as 4G LTE.
The group currently has net tangible assets of RM344.2 million, non-current assets of RM453.2 million, current assets of RM303.6 million, non-current liabilities of RM243.9 million and current liabilities of RM174.7 million as at end-December 2013. It also has a net cash of RM31.8 million as of end-Dec 2013.
“Sacofa is a ‘one-stop centre’ providing telecommunication infrastructure to service providers in Sarawak,” Maybank IB added. “To facilitate Sacofa in achieving its objectives, the State Government granted Sacofa an exclusive right to construct, own and manage the communication infrastructure in Sarawak on the concept of sharing basis.
“At present, Sacofa operates more than 600 telecommunication towers, comprising mainly heavy duty towers and monopoles of various heights, throughout Sarawak. Sacofa leases its towers to the local telecommunication players including TM, Celcom, DiGi and Maxis.”
To note, Sacofa’s largest single shareholder is the State Financial Secretary (SFS) with a 70.51 per cent stake, followed by Celcom Axiata Bhd at 15.12 per cent, Sarawak Information Systems Sdn Bhd (SAINS) at 7.57 per cent and Yayasan Sarawak at 6.8 per cent.
Based on Sacofa’s reported FY13 net profit of RM52 million and net tangible assets of of RM344 million, Maybank IB Research stated that CMS is paying seven times on Sacofa’s earnings and 1.1 times profit per NTA. With just seven years left of its remaining concession period, it would seem that CMS is paying full value for Sacofa, it said.
“The upside would thus have to come from an extension to Sacofa’s concession period beyond 2022 and new businesses that Sacofa can bring to the table.”
KUCHING: Zecon Bhd has entered an agreement with PR1MA Corporation Malaysia (PR1MA) to develop 54 acres for PR1MA homes and retail units in Salak Land District, Kuching.
The construction and engineering group’s wholly-owned subsidiary Zecon Land Sdn Bhd will have four years to build 2,000 units of homes and retail units, and transform the land to a total built-up area of 3.7 million square feet.
PR1MA has purchased the Salak Land District land from Zecon at RM46 million.
“This joint development project with PR1MA is a hallmark project for Zecon Group. It is the largest development for the Group to-date and one that is closest to home for us,” said Datu Hamzah Drahman, Chairman of Zecon.
He added “We are delighted to jointly develop the strategically located Salak Land District Area with PR1MA and to contribute to developing affordable housing for Malaysians. The Salak Land District area is near Kuching High Court and Wisma Bapa Malaysia, making it a sought-after location for Kuching residents.”
“Zecon Group is a veteran in building infrastructure and properties for both public and private projects across Malaysia. We are proud to be part of this PR1MA programme and share our expertise in infrastructure and building works.”
Under this joint development agreement, Zecon and PR1MA will share the costs and expenditures for the construction and completion of necessary and common infrastructures for this development.
KUCHING: The implementation of the goods and services tax (GST) will potentially have a negative impact on private hospitals’ margins and the tax will likely cause a decline their patients’ volume.
However, pharmaceutical products are likely remain more stable despite speculations of a separation of drug prescription and distribution, analysts view.
Kenanga Investment Bank Bhd’s research arm (Kenanga Research) in a recent report, pointed out that going forward, the implementation of GST and further subsidy rationalisation programme could dampen private hospitals’ margins and volume growth.
“From our channels check, we understand that several private hospital players are expected to raise prices in order to mitigate the higher operating cost due to the implementation of GST, which could ultimately exert a negative impact on their margins.
“Generally, healthcare services operating expenses are expected to go up since they have to pay for GST on business purchases or raw material costs before selling but are unable to claim credit for the GST paid on the inputs.
“Similarly, higher prices charged by hospitals as well as further subsidy rationalisation programme could potentially dampen purchasing power of consumers leading to lower volume in patients,” it explained.
Aside from that, Kenanga Research noted that there has been speculations that the Health Ministry might prohibit doctors from dispensing drugs to their patients and hence restrict their roles to only prescribing.
“It was also reported that organisations representing doctors and pharmacists agreed, in principle, that dispensing be left to the pharmacists,” it added.
“If this materialises, pharmacy operators will be the winners of the new system as their sales should be boosted considerably.
“However, pharmaceutical players being the source suppliers are unlikely to be affected. Specifically, revenue generated by Pharmaniaga Bhd (under our coverage) is supported by government concession agreements, non-government purchasers and exports to a smaller extent,” the research firm viewed.
Kenanga Research also noted that it preferred Pharmaniaga for its defensive earnings being the sole concession holder to purchase, store, supplies and distribute approved drugs and medical products to Government hospitals and clinics nationwide, its growth exposure in the healthcare and pharmaceuticals industry supported by an ageing population, and decent dividend yield of 4.8 per cent.
“Overall, we believe that the healthcare industry in Malaysia will continue to enjoy stable growth supported by growing healthcare expenditure, rising medical insurance and aging population demographics,” the research firm said, noting that it pegged an ‘underweight’ rating on the overall sector.
KUCHING: With all the furor over whether telecommunication service providers should or should not pass down the Goods and Services Tax (GST) to customers, channel checks confirmed that GST is applied on prepaid reloads at all the four major wireless telcos.
It is noted that prepaid users pay an incremental amount for GST above their reload values.
For prepaid starter packs however, Maxis and Celcom have chosen to absorb the GST, meaning prepaid users are status quo before and after GST implementation. For Digi and UMobile, prepaid users now incur an additional six per cent GST for the purchase of starter packs.
An analyst from AllianceDBS Research Sdn Bhd (AllianceDBS Research) affirmed that this will have a positive impact on the mobile operators given that they had been absorbing the old six per cent service tax on behalf of their prepaid subscribers in the past.
“There are two comforting points in this. First, a change in pricing structure to price plus GST (as opposed to GST-inclusive pricing) is preferable as this would minimise potential negative impacts to earnings for mobile operators if the GST rate is hiked in the future,” it explained in a note yesterday.
“Second, as all the mobile operators are passing on the GST, this alleviates previous concerns that some players might want to be aggressive to gain market share by continuing to absorb the tax instead.
AllianceDBS Research had conservatively assumed a three per cent effective increase in prepaid revenue for the mobile players as it believed usage might be slightly impacted due to price inflation in the economy.
“This had previously led to an earnings upgrade of about two to five per cent for the mobile players in FY15 to FY16F.”
The analyst pegged DiGi.com Bhd to benefit the most as it has the highest percentage of revenue generated from prepaid subscribers compared to peers.
In a separate report, Maybank Investment Bank Bhd (Maybank IB Research) the implementation of GST effectively allows wireless telcos a chance to pass on the tax they previously absorbed in the prepaid segment.
Thus, it should come as no surprise that consumers now bear the GST charge for reloads.
“The differing GST treatment on prepaid starter packs by telcos serves to emphasise our point that the benefits of GST are not as clear-cut as simply a direct flow-through of the previously foregone revenue down to EBITDA (earnings before interest, tax, depreciation and amortisation),” it said.
“There are elasticity considerations, and competition remains intense, meaning part of the newfound revenue could be returned back to customers in the form of lower effective tariffs. It remains to be seen how price points would eventually trend in the coming months.
“We have assumed operators enjoy the equivalent of a three per cent passthrough in service taxes in our earnings forecasts.”
KUCHING: Many property developers foresee a slowdown in sales of commercial properties with the Goods and Services Tax (GST) coming into play today.
According to Sarawak Housing and Real Estate Association (Sheda), many developers expressed concerns that “many things are still uncertain” and that “business sentiments are not doing well.”
This, the association said, was examplified by the demand of houses from the last three months which grew stronger in terms of unit bookings as these bookings are subjected to the purchasers ability to secure banks’ housing loan, it said yesterday.
Eventhough residential houses are exempted, Sheda observed that building materials, labour and machineries hire will be subjected to GST which input tax cannot be claimed back.
“Thus, there is an estimate of two to three per cent increase in construction costs of new residential houses,” it added in its statement to The Borneo Post.
“Whether selling price of houses will increase or not, are still subjected to market forces of supply and demand even though the cost has increased slightly.”
Purchasers can hunt for new houses that are nearly or completed as the developers might still sell the houses at pre-GST prices or completed second~hand houses, as these type of house prices might not goes up immediately after April 1.
“It pays to shop around and compare prices,” it advised.
Meanwhile, Tourism and Culture Minister Datuk Seri Mohamed Nazri Abdul Aziz urged property developers to remain vigilant in their cost measures to ensure that properties are still attractive after the implementation of GST.
He said as responsible developers, they should take the lead in overcoming problems of overdevelopment so that home prices are within reach of citizens.
“I hope the social responsibility of developers to continue helping the Government in achieving progress by offering quality and affordable products to the masses will continue,” he said at the Malaysia Property Insight Prestigious Developer Awards 2015 here yesterday.