FRESH from welcoming back its deputy group chairman Datuk Seri Mahmud Abu Bekir Taib after he was found innocent of an allegation of conflict of interest made against him and the company’s former chief information officer Karl Vink @ Khalid Abdullah, there is another issue of a bigger proportion brewing in Cahya Mata Sarawak Bhd (CMSB).
To clear the air, the Sarawakian conglomerate which is closely linked to the family of Sarawak Governor Tun Abdul Taib Mahmud staged an analyst briefing to shed light into the recent suspension of its group chief financial officer (CFO) Syed Hizam Alsagoff for one month.
According TA Securities Research, the Cahya Mata board had received a formal complaint from investors on possible financial mismanagement in relation to the investment and contract losses in the Pan Borneo Highway from 2016 to 2020.
Hence, the board has suspended the group CFO in order to facilitate the investigations.
“Meanwhile, the duties of the group CFO are temporarily taken over by Madam Tan Mei Fung, the general manager in group finance, who has been with the company for 24 years,” revealed analyst Chan Mun Chun in a company update.
“Based on management’s guidance, the total loss incurred was about RM54 mil which had already been recognised in the previous financial years. The management guided that no further loss is expected from this incident in the foreseeable future.”
Moreover, Cahya Mata is said to be in the midst of appointing an external independent party to investigate the allegations and principally to perform internal control reviews especially on its construction division.
TA Securities Research opined that if the allegations against Syed Hizam are proven to be true, it would certainly affect Cahya Mata’s ESG (environmental, social and governance) rating.
“Nevertheless, we believe that business operations will remain intact as the investigation will not affect daily operations,” suggested the research house.
“We reckon that the group is likely to achieve stronger earnings in the upcoming quarters, underpinned by healthy demand for building materials from the local infrastructure projects as well as the strong recurring income from Sacofa Sdn Bhd (the Sarawak-state controlled telecommunications infrastructure arm).”
Additionally, TA Securities Research also expects OM Materials (Sarawak) Sdn Bhd – the group’s flagship smelter complex in Samalaju, Sarawak – to return to the black, thanks to the strong recovery of average selling prices for ferrosilicon and manganese.
All-in-all, the research house not only maintained Cahya Mata’s target price of RM2.40/share but also upgraded the company to “buy” (from “hold” previously) as it believes that the recent sell-down in the share provides a favourable risk-reward ratio to investors.
At yesterday’s close of trading, Cahya Mata was down 33 sen or 16.26% to RM1.70 with 80.48 million shares traded, thus valuing the company at RM1.83 bil. – May 7, 2021
