CAHYA Mata Sarawak Bhd finds itself entangled yet again in a corporate governance (CG) web with the appointment of a Taib family member as the company’s head honcho.
Yesterday (July 8), Datuk Seri Sulaiman Abdul Rahman Abdul Taib who is brother of the company’s group deputy chairman Datuk Seri Mahmud Abu Bekir Taib and the son of Sarawak’s Governor Tun Abdul Taib Mahmud was appointed as managing director of the Kuching-based conglomerate to replace Datuk Isaac Lugun.
According to Cahya Mata chairman Tan Sri Abdul Rashid Abdul Manaf, this transition is due to the early retirement of Lugun who will continue to serve the group as a non-independent non-executive director.
“Expect near-term share price weakness,” UOB Kay Hian Research analyst Noor Hazmy Noor Hazin in a company update.
“This change, together with other events such as the conflict-of-interest allegation against Mahmud (Abu Bekir) and the temporary suspension of group chief financial officer (Syed Hizam Alsagoff) for the past two months has caused Cahya Mata’s share price to plummet over 40% year-to-date.”
The research house regarded the drop in Cahya Mata’s share price as a sign of market disappointment given the company has contradicted the direction that it planned to take originally which is for its founding family to take a step back from the company.
“Now, it seems that the family still wields influence in Cahya Mata,” UOB Kay Hian Research pointed out.
For the record, Sulaiman was re-appointed as Cahya Mata’s director on June 22 or a day after Ho Heng Chuan and Datuk Seri Yam Kong Choy resigned from the board.
He was a director at Cahya Mata in 2008 before he left to assume the post of Deputy Minister of Tourism. He was originally appointed to the board in 1995 and has held multiple executive positions since then.
“(That) these major moves that happened in a span of only two months seem to indicate a deeper internal issue at Cahya Mata,” hinted UOB Kay Hian Research.
All-in-all, the research house maintained its “hold” rating on Cahya Mata with a target price of RM1.40.
“We have ascribed a 40% discount to our SOTP-based valuation to reflect the governance risk factor, implying nine times 2022F PE (price-to-earnings ratio),” justified UOB Kay Hian Research.
“We expect share price weakness in the near term as the stock is likely to be sidelined until there is clarity on the outcome of the ongoing investigations which could bring implications on the company’s future governance.”
At 2.41pm, Cahya Mata was down 6 sen or 5.17% to RM1.10 with 44.35 million shares traded, thus valuing the company at RM1.18 bil. – July 9, 2021
