Sacofa plum only 50% purchase boosts CMS profits exponentially
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.”