Refer to important disclosures at the end of this report

BUYBUYBUYBUY RMRMRMRM3.753.753.753.75 KLCIKLCIKLCIKLCI : : : : 1,681.901,681.901,681.901,681.90 (Upgrade from Hold)

Price Target :Price Target :Price Target :Price Target : 12-Month RM 4.30 (Prev RM 4.00)

Shariah Compliance:Shariah Compliance:Shariah Compliance:Shariah Compliance: Yes

Reason for Report :Reason for Report :Reason for Report :Reason for Report : Company visit; Earnings & TP upgrade

Potential Catalyst: Potential Catalyst: Potential Catalyst: Potential Catalyst: Earnings-accretive acquisitions

AllianceDBSAllianceDBSAllianceDBSAllianceDBS vs vs vs vs Consensus:Consensus:Consensus:Consensus: FY15-16F EPS below consensus on more

conservative contribution from OM Sarawak Analyst Woo Kim TOH +603 2604 3917 wookim@alliancedbs.com

Price Relative

Forecasts and Valuation FY FY FY FY DecDecDecDec ((((RMRMRMRM m) m) m) m) 2013201320132013AAAA 2014201420142014FFFF 2015201520152015FFFF 2016201620162016FFFF

Revenue 1,417 1,525 1,571 1,715 EBITDA 361 414 473 527 Pre-tax Profit 295 326 378 423 Net Profit 175 201 239 274 Net Pft (Pre Ex.) 153 201 239 274 EPS (sen) 16.8 19.4 23.0 26.3 EPS Pre Ex. (sen) 14.7 19.4 23.0 26.3 EPS Gth (%) 29 15 19 14 EPS Gth Pre Ex (%) 28 32 19 14 Diluted EPS (sen) 14.7 19.4 23.0 26.3 Net DPS (sen) 15.8 7.7 11.5 13.2 BV Per Share (sen) 159.2 170.8 182.3 195.5 PE (X) 22.3 19.4 16.3 14.2 PE Pre Ex. (X) 25.5 19.4 16.3 14.2 P/Cash Flow (X) 16.5 11.7 11.6 10.7 EV/EBITDA (X) 9.7 8.3 7.2 6.3 Net Div Yield (%) 4.2 2.1 3.1 3.5 P/Book Value (X) 2.4 2.2 2.1 1.9 Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) 11.2 11.7 13.0 13.9 Earnings Rev (%):Earnings Rev (%):Earnings Rev (%):Earnings Rev (%): 0 4 7 Consensus EPS Consensus EPS Consensus EPS Consensus EPS (sensensensen):::: 20.0 25.5 31.0 Other Broker Recs:Other Broker Recs:Other Broker Recs:Other Broker Recs: B: 2 S: 0 H: 2 ICB IndustryICB IndustryICB IndustryICB Industry : Industrials ICB Sector: ICB Sector: ICB Sector: ICB Sector: Construction & Materials Principal Business:Principal Business:Principal Business:Principal Business: Sarawak-based conglomerate with business in cement, construction materials, road maintenance, etc.

Source of all data: Company, AllianceDBS, Bloomberg Finance L.P.

At A Glance Issued Capital (m shrs) 1,039 Mkt. Cap (RMm/US$m) 3,898 / 1,114 Major Shareholders Alwee Alsree Syed Ahmad (%) 13.4 Majaharta Sdn Bhd (%) 13.0 Taib Lejla (%) 10.7 Free Float (%) 33.0 Avg. Daily Vol.(‘000) 1,676

Malaysia Equity Research

18 Dec 2014

Company Focus

Cahya Mata Sarawak Bloomberg: CMS MK | Reuters: CMSM.KL Refer to important disclosures at the end of this report

The Jewel of Sarawak • FY14: strong performance by key divisions amid

robust development activities in Sarawak

• Maiden earnings contribution from OM Sarawak (20% stake) in FY15

• Raised FY15-16F EPS by 4-7%, implying strong 3-year earnings CAGR of 16%

• Upgrade to BUY, raised TP to RM4.30

Strong performance by key divisions in FY14. The cement division is operating at full capacity, while margins have improved following the 5-9% ASP hike early this year. The construction materials and road maintenance divisions have been posting record profits amid robust construction activities and infrastructure development in the state. This will persist in 2015 as the Sarawak state government may increase infrastructure spending ahead of the state election in 2016. Maiden contribution from OM Sarawak. Four of the 16 ferrosilicon furnaces were commissioned in 4Q14, and the rest will be fired up gradually to reach full operation by 2Q15. At 70% utilisation rate, we estimate OM Sarawak will contribute about 11% of CMS’ bottomline in FY15. Raised FY15-16F EPS by 4-7%. We imputed lower coal cost for the cement division, albeit the impact was partly offset by the weaker Ringgit. Our revised forecasts indicate strong 3-year earnings CAGR of 16% p.a. for CMS over FY14-16F. Upgrade to BUY, raised TP to RM4.30 (SOP). . . . The share price has corrected by 25% from its recent peak and is now at an attractive entry level for investors. The company’s fundamentals are stable with limited downside risk.

65

115

165

215

265

315

365

415

465

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

Relative IndexRM

Cahya Mata Sarawak (LHS) Relative KLCI INDEX (RHS)

Page 2

Company Focus

Cahya Mata Sarawak

INVESTMENT THESIS

Profile Rationale

CMS is a monopoly producer of cement in the state of

Sarawak. They are also involved in building materials, road

maintenance, property development, and maintain a lodging

facility at Samalaju Industrial Park. The company also has

20%-stake in a ferrosilicon plant.

Natural mNatural mNatural mNatural monopoly in the Sarawak cement industry onopoly in the Sarawak cement industry onopoly in the Sarawak cement industry onopoly in the Sarawak cement industry

• CMS operates a natural monopoly in the Sarawak cement market. As such, it is not affected by intense competition,

unlike its Peninsular peers.

Access to cheap electricity Access to cheap electricity Access to cheap electricity Access to cheap electricity

• CMS has 20% stake in OM Sarawak which produces ferro-alloys and manganese. The JV has signed a 20-year

power purchase agreement that will provide the smelters

with access to cheap electricity in Sarawak.

• Electricity is the largest cost component for ferro-alloy producers at 30-50% of total production cost.

Additional capacity from new cement plant Additional capacity from new cement plant Additional capacity from new cement plant Additional capacity from new cement plant

• CMS is constructing a new cement plant with an annual capacity of 1m MT as cement demand in Sarawak exceeds

supply currently.

Valuation Risks

Our SOP-based TP for CMS is RM4.30, implying 15.3x FY15

P/E (ex- net cash) and 2.0x FY15 P/B.

Raw Raw Raw Raw material costsmaterial costsmaterial costsmaterial costs

• Fluctuation in raw material costs (i.e coal, steel) will impact margins for its cement and building materials

division.

Exposure to volatile commodity price Exposure to volatile commodity price Exposure to volatile commodity price Exposure to volatile commodity price

• Fluctuations in ferro-alloy prices could swing associate profits from OM Sarawak.

Source: AllianceDBS

Page 3

Company Focus

Cahya Mata Sarawak

A Sarawak-based conglomerate

We met with Cahya Mata Sarawak (CMS)’s management

recently for an update on their operations. CMS is a Sarawak-

based conglomerate that is mostly involved in cement

manufacturing, construction materials, road maintenance, and

property development. See Appendix for company

background.

EXHIBIT 1: FY13 revenue contribution by division

Sources: Company

CEMENT – Operating at full speed

EXHIBIT 2: Revenue & PBT

Sources: Company

OOOOperating perating perating perating at at at at almostalmostalmostalmost ffffull capacityull capacityull capacityull capacity. CMS owns the only two

cement manufacturing plants in Sarawak with a combined

annual capacity of 1.75m MT. Capacity utilisation has

remained high at >90% since 2013 as robust cement demand

in Sarawak outstripped supply. To meet increasing demand,

the company is building a new 1.0m MT cement plant that will

probably come on stream in early 2016. This will help to

replace cement imports into Sarawak, currently carried out by

CMS with minimal profit contribution to its financials.

Better margins Better margins Better margins Better margins afterafterafterafter ASP hikASP hikASP hikASP hike, e, e, e, withwithwithwith costcostcostcostssss largely stablelargely stablelargely stablelargely stable....

Margins and profitability for the cement division have

improved in 2014 following the 5-9% price hike in early

February. This was in anticipation of a price hike by Peninsular

cement producers to pass on the 19% increase in electricity

tariff starting Jan 2014. But the electricity tariff has not been

raised in Sarawak, so CMS’ production cost was largely

unchanged.

Lower coal costLower coal costLower coal costLower coal cost.... Coal prices have fallen to USD62/tonne

currently, 26% lower than 2013 average of USD84 and 11%

below the YTD average of USD70. This will lift margins further

for the cement division in 2015, although the impact may be

partly offset by the weaker Ringgit.

CONSTRUCTION MATERIALS & TRADING – Good year

ahead

EXHIBIT 3: Revenue & PBT

Sources: Company

ComplementComplementComplementComplementssss other divisionother divisionother divisionother divisionssss.... CMS is also involved in the

manufacturing and trading of other building materials in

Sarawak, including concrete products, quarries, premix, and

wire mesh. This division accounted for 28% of group revenue

and 19% of earnings in FY13. FY13 and YTD-FY14 are record

years for revenues as CMS has started to supply mild steel

pipes to the Public Works Department through its trading

division. In addition, premix sales volumes were also higher

these two years amid more job flows for the maintenance of

state roads in Sarawak.

GGGGood year ahead with the ood year ahead with the ood year ahead with the ood year ahead with the state election in 2016state election in 2016state election in 2016state election in 2016.... CMS expects

this division to do well in 2015 as the Sarawak state

government may increase spending on infrastructure

development ahead of the state election in 2016. Moreover,

margins are expected to improve due to lower input costs (i.e.

bitumen and diesel), in tandem with the fall in crude oil prices.

Cement36.3%

Construction materials27.8%

Road maintenance

20.4%

Property development

5.3%

Samalaju development

8.0%

Others2.2%

400

445

523 515

399

80 101

66 97 92

-

100

200

300

400

500

600

2010 2011 2012 2013 9M14

Revenue PBT

274

222

281

393 394

37 25 41

55 51

-

100

200

300

400

500

2010 2011 2012 2013 9M14

Revenue PBT

Page 4

Company Focus

Cahya Mata Sarawak

ROAD MAINTENANCE – steady as it goes

EXHIBIT 4: 9MFY14 revenue breakdown by segment

Sources: Company

Steady contribution.Steady contribution.Steady contribution.Steady contribution. This division is involved in road

maintenance works across Sarawak, principally through CMS

Roads S/B and 51%-owned PPES Works (Sarawak) S/B. The

former maintains approximately 4,800 km of state roads, and

the latter about 680km of federal roads. Contribution from

this division has been rising steadily as CMS carried out more

road upgrading works over the years.

Pan Borneo HighwayPan Borneo HighwayPan Borneo HighwayPan Borneo Highway may be amay be amay be amay be a catalystcatalystcatalystcatalyst.... The Pan Borneo

Highway, estimated to cost RM27bn to complete, will span

936km across Sarawak and 727km across Sabah. The Sarawak

section will largely involve the upgrading of existing trunk

roads into dual-lane carriageways. The contract is likely to be

awarded to several players (including CMS) given the huge

project size, but the timing of the award is uncertain.

Renewal Renewal Renewal Renewal of concession contractsof concession contractsof concession contractsof concession contracts. . . . The road maintenance

concession under CMS Roads S/B is for 15 years and will expire

in December 2017. The concession under PPES Works

(Sarawak) S/B will expire in August 2018. CMS is hopeful that

these concessions will be renewed or extended given its good

track record, and major investments made by the company in

plant and machinery over the years. The management targets

to secure the renewal by 2015 or latest in 2016.

PROERTY DEVELOPMENT – a long-term play

EXHIBIT 5: 9MFY14 revenue breakdown, by segment

Sources: Company

OwnOwnOwnOwns ms ms ms major landbankajor landbankajor landbankajor landbankssss in Sarawakin Sarawakin Sarawakin Sarawak. . . . This division property owns

4,510 acres of landbank in Sarawak, including two large

landbanks: 1) 4,211-acre landbank that is being developed

into a riverine township called Bandar Samariang; and 2) 199-

acre landbank which is being developed into Kuching’s new

central business district, The Isthmus.

LongLongLongLong----term growth potential. term growth potential. term growth potential. term growth potential. Under its strategy to fast-track

development in Bandar Samariang, CMS sold several pieces of

land in 2012 and 2013 to other property developers such as

Hock Seng Lee and Sentoria Group. The company booked

huge disposal gains as those lands were purchased long ago at

much lower prices. Going forward, CMS plans to have minimal

or even halt land sales, preferring to develop the landbank on

their own.

75

185

235

289

250

42

69 80

95

60

-

100

200

300

400

2010 2011 2012 2013 9M14

Revenue PBT

166

103

60

75

92

2 3

24 31

46

-

20

40

60

80

100

120

140

160

180

2010 2011 2012 2013 9M14

Revenue PBT

Page 5

Company Focus

Cahya Mata Sarawak

Samalaju Development – Temporary setback

EXHIBIT 6: 9MFY14 revenue breakdown, by segment

Sources: Company

Facilities provider for SIPFacilities provider for SIPFacilities provider for SIPFacilities provider for SIP.... CMS owns 51%-stake in Samalaju

Property Development S/B (SPD) which are mainly involved in;

1) the provision of temporary accommodation and meal

facilities for construction workers at the Samalaju Industrial

Park (SIP); and 2) the development of a new township as well

as a service centre for Samalaju. Occupancy rate at the

workers lodge has been low in 2014 as the early investors in

SIP have completed most of their plants. However,

management expects things to improve in 2015 with the

arrival of a new batch of construction workers for several new

projects (including associate OM Sarawak Phase 2 plant).

OM Sarawak (20% stake) – Firing up

FeSi producerFeSi producerFeSi producerFeSi producer.... OM Materials (Sarawak) S/B is currently

constructing a greenfield ferrosilicon (FeSi) and manganese

alloy smelter in SIP. The remaining 80% stake is owned by OM

Holdings Ltd, an Australian-listed vertically-integrated miner,

smelter and trader of manganese and other ores/alloys. This

smelter project will be developed in two phases at a total cost

of about USD592m, funded by 70% project finance and 30%

equity.

Phase 1 firing up graduallyPhase 1 firing up graduallyPhase 1 firing up graduallyPhase 1 firing up gradually.... Phase 1 of the project cost

USD424m to build, and will ultimately have 16 furnaces

capable of producing 310,000 tonnes of FeSi annually. As at

4Q14, four of these furnaces have been commissioned; the

rest will be fired up gradually to reach full commission by

2Q15. At 70% utilisation rate, we project OM Sarawak will

contribute 11% to CMS bottomline in FY15.

EXHIBIT 7: Off-take agreements

DateDateDateDate signedsignedsignedsigned CompanyCompanyCompanyCompany FeSiFeSiFeSiFeSi offoffoffoff----take amount take amount take amount take amount (MT/year)(MT/year)(MT/year)(MT/year)

Jun 2012 JFE Shoji Trade Corp 80,000

Jul 2012 Hanwa Co 50,000

Dec 2012 Fesil Sales AS 60,000

Total 190,000

Sources: Company, AllianceDBS’s estimates

OOOOffffffff----take arrangementtake arrangementtake arrangementtake arrangementssss and longand longand longand long----term PPAterm PPAterm PPAterm PPA reducereducereducereduce riskriskriskriskssss.... Prior

to commencement, OM Sarawak had secured off-take

agreements for more than 60% of Phase 1 output (see Exhibit

7). This reduces project risk significantly, along with the 20-

year power purchase agreement (PPA) signed at competitive

rates. This project also has a 5-year tax holiday and does not

attract import and/or export duties on raw materials and final

products.

MPA Sarawak – The next CMS project in SIP

40%40%40%40%----stake in phosphate producerstake in phosphate producerstake in phosphate producerstake in phosphate producer.... In Jan 2014, CMS entered

into a JV with Malaysian Phosphate Additives S/B (MPA) to

jointly develop a RM1bn integrated phosphate plant with a

capacity of 500,000 MT/year in SIP. The PPA term sheet for the

plant has been finalised, and the signing of the PPA is

expected to be concluded soon. CMS will inject about

RM125m into the JV, based on a 70% debt and 30% equity

funding structure (same as OM Sarawak). This plant may be

operational by 2H 2016 and is estimated to contribute

RM100m to CMS’ bottomline at full capacity.

26

72

113

8

(12)

25 27

7

(20)

-

20

40

60

80

100

120

2010 2011 2012 2013 9M14

Revenue PBT

Page 6

Company Focus

Cahya Mata Sarawak

Financial highlights

RaisedRaisedRaisedRaised FY15FY15FY15FY15----16F earnings by 416F earnings by 416F earnings by 416F earnings by 4----7%7%7%7%. . . . This was to reflect lower

coal cost for the cement division. The impact is partly offset by

the weaker Ringgit.

Strong Strong Strong Strong 3333----year year year year earnings CAGR of 16%earnings CAGR of 16%earnings CAGR of 16%earnings CAGR of 16% over FY14over FY14over FY14over FY14----16F16F16F16F.... This

would be primarily driven by the cement and building

materials divisions, as well as maiden contribution from OM

Sarawak. Beyond that, longer term growth will be

underpinned by the property division and MPA Sarawak.

EXHIBIT 8: CMS revenue and earnings trend

Sources: Company, AllianceDBS’s estimates

IncreasingIncreasingIncreasingIncreasing dividenddividenddividenddividendssss.... CMS increased its dividend payout

policy to 40% in FY14, from 30% in previous years. The

management is more comfortable with the group’s financial

position now that OM Sarawak has started operation, and

has hinted they may raise payout to 50% in FY15.

Valuation

TP TP TP TP raised to raised to raised to raised to RM4.30RM4.30RM4.30RM4.30.... Following the earnings upgrade, we

revised up our SOP-based TP from RM4.00 to RM4.30,

implying 15.3x FY15 P/E (ex- net cash) and 2.0x FY15 P/B.

Our TP is reasonable; we applied conservative P/E multiples to

value CMS’ key business divisions (See Exhibit 9).

Upgrade to BUYUpgrade to BUYUpgrade to BUYUpgrade to BUY.... In tandem with the Malaysian stock

markets, CMS’ share price has corrected by about 25% from

its recent peak. The stock now offers an attractive entry point

for investors. The company’s fundamentals are improving,

with little downside risk. As at Sep 2014, CMS’ balance sheet

remains strong with RM582m net cash (or RM0.56/share).

EXHIBIT 9: SOP-based valuation for CMS

Sources: AliianceDBS

0

50

100

150

200

250

300

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2009 2010 2011 2012 2013 2014F 2015F

Revenue (LHS) PATAMI (RHS)

Bus ine ss d ivi s ionBus ine ss d ivi s ionBus ine ss d ivi s ionBus ine ss d ivi s ion Va lua tionVa lua tionVa lua tionVa lua tion Effe c tiveEffe c tiveEffe c tiveEffe c tive Multip leMultip leMultip leMultip le Va lua tionVa lua tionVa lua tionVa lua tion Pe r CMSPe r CMSPe r CMSPe r CMS De sc rip tionDe sc rip tionDe sc rip tionDe sc rip tion

Me thodMe thodMe thodMe thod sta kesta kesta kesta ke (x)(x)(x)(x) (RM m)(RM m)(RM m)(RM m) sha resha resha resha re

Cement P/E 100% 18.0 2,060 1.98 Discount to our target P/E for Lafarge

Construction materials P/E 51% 10.0 288 0.28 Pegged to 10x FY15 P/E

Road maintenance P/E 100% 9.0 726 0.70 Pegged to 9x FY15 P/E

Property RNAV 60% 128 0.12 60% discount to estimated market value, less MI

Samalaju development P/E 51% 8.0 26 0.02 Conversative 8x FY15 P/E

OM Sarawak P/E 20% 8.0 240 0.23 Conversative 8x FY15 P/E

Tota l va lueTota l va lueTota l va lueTota l va lue 3,468.1 3 .343.343.343.34

25% stake in K&N Kenanga 105.2 0.10

20% stake in KKB Engineering 79.9 0.08

Net cash / (net debt) 677.6 0.65 End-FY15 forecast

Investment securities 127.1 0.12 End-FY15 forecast

SOP-ba se d TPSOP-ba se d TPSOP-ba se d TPSOP-ba se d TP 4.304.304.304.30 Implied 15.3x FY15 P/E and 2.0x P/B

Page 7

Company Focus

Cahya Mata Sarawak

Appendix - Background

Cahya Mata Sarawak Bhd (CMS) is among the largest public-

listed companies based in Sarawak. They started as a cement

manufacturer in 1974, and have successfully diversified over

the years into manufacturing and trading of construction

materials, construction, road maintenance, and property

development. Exhibit 10 and 11 give an overview of CMS’

current business divisions and corporate milestones.

EXHIBIT 10: Overview of key business divisions

Sources: Company

EXHIBIT 11: Corporate milestones

Sources: Company

Page 8

Company Focus

Cahya Mata Sarawak

Key Assumptions FY FY FY FY DecDecDecDec 2012201220122012AAAA 2013201320132013AAAA 2014201420142014FFFF 2015201520152015FFFF 2016201620162016FFFF

Clinker - utilisation rate (%)

30.0 75.0 90.0 90.0 95.0 Cement - utilisation rate (%)

87.9 90.0 90.0 90.0 68.0

Cement ASP (RM/tonne) 280.0 310.0 325.0 325.0 325.0 OM Sarawak - utilisation rate (%)

0.0 0.0 10.0 70.0 90.0 Ferrosilicon ASP (USD/tonne)

0.0 0.0 1,300.0 1,300.0 1,300.0 Segmental Breakdown

FY FY FY FY DecDecDecDec 2012201220122012AAAA 2013201320132013AAAA 2014201420142014FFFF 2015201520152015FFFF 2016201620162016FFFF Revenues (RM m)

Cement 523 515 544 550 653 Construction materials & trading

281 393 511 537 553

Road maintenance 235 289 305 326 339

Samalaju development 72 113 17 34 41

Others 60 75 112 90 94

TotalTotalTotalTotal 1,2041,2041,2041,204 1,4171,4171,4171,417 1,5251,5251,5251,525 1,5711,5711,5711,571 1,7151,7151,7151,715

Income Statement (RM m)

FY FY FY FY DecDecDecDec 2012201220122012AAAA 2013201320132013AAAA 2014201420142014FFFF 2015201520152015FFFF 2016201620162016FFFF

Revenue 1,204 1,417 1,525 1,571 1,715

Cost of Goods Sold (906) (1,066) (1,118) (1,138) (1,237)

Gross ProfitGross ProfitGross ProfitGross Profit 298298298298 351351351351 407407407407 433433433433 478478478478 Other Opng (Exp)/Inc (80) (81) (80) (78) (85)

Operating ProfitOperating ProfitOperating ProfitOperating Profit 217217217217 269269269269 327327327327 355355355355 393393393393 Other Non Opg (Exp)/Inc 0 0 0 0 0

Associates & JV Inc 4 7 5 33 44

Net Interest (Exp)/Inc (11) (4) (6) (10) (14)

Exceptional Gain/(Loss) 17 23 0 0 0

PrePrePrePre----tax Profittax Profittax Profittax Profit 227227227227 295295295295 326326326326 378378378378 423423423423

Tax (60) (79) (83) (90) (99)

Minority Interest (31) (40) (41) (49) (51)

Preference Dividend 0 0 0 0 0

Net ProfitNet ProfitNet ProfitNet Profit 136136136136 175175175175 201201201201 239239239239 274274274274 Net Profit before Except. 119 153 201 239 274

EBITDA 275 361 414 473 527

Growth

Revenue Gth (%) 18.9 17.7 7.6 3.0 9.2

EBITDA Gth (%) 18.5 31.2 14.8 14.4 11.3

Opg Profit Gth (%) 18.5 24.0 21.4 8.5 10.8

Net Profit Gth (%) 13.1 29.0 15.0 18.9 14.3

Margins & Ratio

Gross Margins (%) 24.7 24.8 26.7 27.6 27.9

Opg Profit Margin (%) 18.1 19.0 21.4 22.6 22.9

Net Profit Margin (%) 11.3 12.4 13.2 15.2 15.9

ROAE (%) 9.4 11.2 11.7 13.0 13.9

ROA (%) 6.4 7.7 7.8 8.4 8.8

ROCE (%) 8.7 10.2 11.2 11.3 11.3

Div Payout Ratio (%) 97.6 93.5 40.0 50.0 50.0

Net Interest Cover (x) 19.8 68.8 52.1 35.7 28.7

Source: Company, AllianceDBS

Margins Trend

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

2012A 2013A 2014F 2015F 2016F

Operating Margin % Net Income Margin %

ASP hike in early Feb 2014

Contribution from OM Sarawak starts to kick-in

Page 9

Company Focus

Cahya Mata Sarawak

Quarterly / Interim Income Statement (RM m)

FY FY FY FY DecDecDecDec 3Q3Q3Q3Q2013201320132013 4Q4Q4Q4Q2013201320132013 1Q1Q1Q1Q2014201420142014 2Q2Q2Q2Q2014201420142014 3Q3Q3Q3Q2014201420142014

Revenue 335 433 373 383 413

Cost of Goods Sold (265) (306) (287) (275) (314)

Gross ProfitGross ProfitGross ProfitGross Profit 71717171 128128128128 87878787 109109109109 99999999 Other Oper. (Exp)/Inc (8) (21) (23) (10) (2)

Operating ProfitOperating ProfitOperating ProfitOperating Profit 62626262 106106106106 63636363 99999999 97979797 Other Non Opg (Exp)/Inc (1) (24) (1) (1) (16)

Associates & JV Inc 1 4 4 1 8

Net Interest (Exp)/Inc 0 0 0 0 0

Exceptional Gain/(Loss) 0 23 0 0 15

PrePrePrePre----tax Profittax Profittax Profittax Profit 63636363 109109109109 66666666 99999999 104104104104 Tax (13) (30) (18) (22) (18)

Minority Interest (8) (14) (9) (10) (13)

Net ProfitNet ProfitNet ProfitNet Profit 41414141 66666666 39393939 66666666 72727272 Net profit bef Except. 41 43 39 66 57

EBITDA 86 112 92 110 101

Growth

Revenue Gth (%) (0.9) 29.2 (13.9) 2.7 7.7

EBITDA Gth (%) (3.1) 30.4 (18.3) 20.3 (8.4)

Opg Profit Gth (%) (9.0) 70.5 (40.4) 55.3 (1.6)

Net Profit Gth (%) 2.4 60.3 (40.8) 70.0 9.5

Margins Gross Margins (%) 21.1 29.5 23.2 28.3 23.9

Opg Profit Margins (%) 18.6 24.5 17.0 25.7 23.5

Net Profit Margins (%) 12.2 15.2 10.4 17.2 17.5 Balance Sheet (RM m)

FY FY FY FY DecDecDecDec 2012201220122012AAAA 2013201320132013AAAA 2014201420142014FFFF 2015201520152015FFFF 2016201620162016FFFF Net Fixed Assets 576 589 662 732 722

Invts in Associates & JVs 341 384 390 423 467

Other LT Assets 81 101 101 101 101

Cash & ST Invts 631 741 913 1,048 1,270

Inventory 107 131 139 143 156

Debtors 254 267 305 314 343

Other Current Assets 150 210 210 210 210

Total AssetsTotal AssetsTotal AssetsTotal Assets 2,1402,1402,1402,140 2,4242,4242,4242,424 2,7202,7202,7202,720 2,9712,9712,9712,971 3,2703,2703,2703,270

ST Debt

41 73 148 223 298

Creditor 307 340 399 407 442

Other Current Liab 24 38 38 38 38

LT Debt 49 27 27 27 27

Other LT Liabilities 32 58 58 58 58

Shareholder’s Equity 1,481 1,654 1,775 1,895 2,031

Minority Interests 206 234 275 324 375

Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab.Total Cap. & Liab. 2,1402,1402,1402,140 2,4242,4242,4242,424 2,7202,7202,7202,720 2,9712,9712,9712,971 3,2703,2703,2703,270

Non-Cash Wkg. Capital 179 230 216 222 229

Net Cash/(Debt) 542 641 738 798 945

Debtors Turn (avg days) 67.7 67.1 68.5 71.9 69.9

Creditors Turn (avg days) 114.0 120.2 130.2 139.8 135.0

Inventory Turn (avg days) 42.2 44.1 47.4 48.8 47.5

Asset Turnover (x) 0.6 0.6 0.6 0.6 0.5

Current Ratio (x) 3.1 3.0 2.7 2.6 2.5

Quick Ratio (x) 2.4 2.2 2.1 2.0 2.1

Net Debt/Equity (X) CASH CASH CASH CASH CASH

Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH

Capex to Debt (%) 91.1 94.0 88.5 62.0 24.6

Z-Score (X) 8.0 7.1 6.1 5.6 5.1

Source: Company, AllianceDBS

Revenue Trend

Asset Breakdown (2014)

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

50

100

150

200

250

300

350

400

450

500

2Q

201

2

3Q

201

2

4Q

201

2

1Q

201

3

2Q

201

3

3Q

201

3

4Q

201

3

1Q

201

4

2Q

201

4

3Q

201

4

Revenue Revenue Growth % (QoQ)

Strong net cash position

Page 10

Company Focus

Cahya Mata Sarawak

Cash Flow Statement (RM m)

FY FY FY FY DecDecDecDec 2012201220122012AAAA 2013201320132013AAAA 2014201420142014FFFF 2015201520152015FFFF 2016201620162016FFFF

Pre-Tax Profit 227 295 326 378 423

Dep. & Amort. 53 84 82 85 90

Tax Paid (46) (77) (83) (90) (99)

Assoc. & JV Inc/(loss) (4) (7) (5) (33) (44)

Chg in Wkg.Cap. (5) (43) 14 (6) (6)

Other Operating CF (7) (17) 0 0 0

Net Operating CFNet Operating CFNet Operating CFNet Operating CF 219219219219 236236236236 332332332332 335335335335 364364364364 Capital Exp.(net) (82) (94) (155) (155) (80)

Other Invts.(net) (17) (22) 0 0 0

Invts in Assoc. & JV (64) (51) 0 0 0

Div from Assoc & JV 0 0 0 0 0

Other Investing CF 19 24 0 0 0

Net Investing CFNet Investing CFNet Investing CFNet Investing CF (143)(143)(143)(143) (143)(143)(143)(143) (155)(155)(155)(155) (155)(155)(155)(155) (80)(80)(80)(80) Div Paid (49) (43) (80) (120) (137)

Chg in Gross Debt (125) 10 75 75 75

Capital Issues (23) (19) 0 0 0

Other Financing CF (4) 24 0 0 0

Net Financing CFNet Financing CFNet Financing CFNet Financing CF (202)(202)(202)(202) (28)(28)(28)(28) (5)(5)(5)(5) (45)(45)(45)(45) (62)(62)(62)(62)

Currency Adjustments 0 0 0 0 0

Chg in Cash (126) 65 172 135 222

Opg CFPS (sen) 21.6 26.8 30.7 32.8 35.7

Free CFPS (sen) 13.2 13.6 17.1 17.3 27.4

Source: Company, AllianceDBS

Capital Expenditure

Target Price & Ratings History

Source: AllianceDBS

0

20

40

60

80

100

120

140

160

180

2012A 2013A 2014F 2015F 2016F

Capital Expenditure (-)

S.No.S.No.S.No.S.No. Da teDa teDa teDa teClos ing Clos ing Clos ing Clos ing

Pri cePri cePri cePri ce

Ta rge t Ta rge t Ta rge t Ta rge t

Pric ePric ePric ePric eRa ting Ra ting Ra ting Ra ting

1: 28 Aug 14 4.17 4.00 Hold

2: 27 Nov 14 4.60 4.00 Hold

Note Note Note Note : Share price and Target price are adjusted for corporate actions.

1

2

2.02

2.52

3.02

3.52

4.02

4.52

Dec-13 Apr-14 Aug-14 Dec-14

RMRMRMRM

Additional capex to build new cement plant

Page 11

Company Focus

Cahya Mata Sarawak

DISCLOSURE

Stock rating definitions STRONG BUY - > 20% total return over the next 3 months, with identifiable share price catalysts within this time frame BUY - > 15% total return over the next 12 months for small caps, >10% for large caps HOLD - -10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps FULLY VALUED - negative total return > -10% over the next 12 months SELL - negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame Commonly used abbreviations Adex = advertising expenditure EPS = earnings per share PBT = profit before tax bn = billion EV = enterprise value P/B = price / book ratio BV = book value FCF = free cash flow P/E = price / earnings ratio CF = cash flow FV = fair value PEG = P/E ratio to growth ratio CAGR = compounded annual growth rate FY = financial year q-o-q = quarter-on-quarter Capex = capital expenditure m = million RM = Ringgit CY = calendar year M-o-m = month-on-month ROA = return on assets Div yld = dividend yield NAV = net assets value ROE = return on equity DCF = discounted cash flow NM = not meaningful TP = target price DDM = dividend discount model NTA = net tangible assets trn = trillion DPS = dividend per share NR = not rated WACC = weighted average cost of capital EBIT = earnings before interest & tax p.a. = per annum y-o-y = year-on-year EBITDA = EBIT before depreciation and amortisation PAT = profit after tax YTD = year-to-date

Page 12

Company Focus

Cahya Mata Sarawak

DISCLAIMER

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