CAHYA Mata Sarawak Bhd (CMS) is positive on the move by the Sarawak state government to split the road maintenance contracts, as it believes this will promote healthy competition.
“We have always maintained that we are not a monopoly, and this proves it. We applaud the state for its move because competition in any market naturally breeds competitive efficiency. This can only be good for the public and the road users,” said CMS group managing director Datuk Isaac Lugun.
It should be noted that PPES Works (Sarawak) Sdn Bhd, the previous recipient of the contract, is a 51%-owned subsidiary of CMS, and will continue to hold “the lion’s share” of the contract, having signed a letter of acceptance for a performance-based contract for the long-term management and maintenance of Package 1 (Kuching, Serian, Samarahan, Kapit, Sibu and Sarikei Division) for a period of 10 years, effective from Jan 1, 2020. The contract sum is estimated at RM99.2 mil per annum.
Analysts are taking this development in stride, forecasting lower earnings and adjusting their target prices and fair values accordingly. TA Securities maintained its sell call, with a lower target price of RM2.41 from RM2.50.
Meanwhile, AmInvestment Bank maintained its underweight view, with a lower fair value of RM2.03 from RM2.14. MIDF Research maintained its buy call, with a target price of RM2.94, lowered from a previous RM3.12 while AllianceDBS Research maintained a call to hold, with an unchanged target price of RM2.25.
As of 11am on Dec 9, CMS was trading at RM2.46, up 4 sen, with 479,000 shares changing hands.