RAM Ratings revises Cahya Mata Sarawak outlook ratings to positive

RAM Ratings revises Cahya Mata Sarawak outlook ratings to positive

Firm points to company’s new phosphates manufacturing division, possibly bringing big earnings

KUALA LUMPUR – Independent credit research firm Ram Ratings has revised its long-term ratings on Cahya Mata Sarawak Bhd’s from stable to positive, in light of the group’s improving business and financial profiles.

In a statement today, Ram Ratings pointed to the Sarawak-based corporation’s new phosphates manufacturing division, Cahya Mata Phosphates, as a potential significant earnings contributor from fiscal year 2024.

“Cahya Mata Phosphates started commissioning production and will transition to commercial operations by mid-2023, (which) will diversify the group’s current construction-focused business profile and further strengthen its financial profile, with segmental contribution potentially reaching half of the group’s earnings.

“We also view the group to be a direct beneficiary of a rise in Sarawak’s construction activity. The ratings may be upgraded if Cahya Mata Phosphates can demonstrate stable operational and financial performances,” the firm said.

It also stated that Cahya Mata’s heavy reliance on Sarawak’s economy, a lack of geographical diversification and its cyclical core businesses are rating moderators.

“The rising prominence of Cahya Mata Phosphates’ earnings will reduce exposure to these factors, and the group also anticipates modest contributions from recently acquired businesses in drilling fluids and drilling waste management to be more meaningful over the longer term,” it said.

“The ratings continue to be backed by Cahya Mata’s sturdy foothold in Sarawak’s cement industry, with the company directly benefiting from the state’s continued focus on infrastructure development.

“A rebound in the state’s construction activity supported a 23.9% uptick in the group’s fiscal year December 2022 top line to RM1.01 billion.

“Its strong financial profile is envisaged to further strengthen over the next three years, with a widening net cash position and operating cash flow debt coverage of above 0.3 times,” it added.

RAM Ratings, however, said that it is cognisant of challenges in ramping up production, with any significant deviation from Cahya Mata’s plans and realisation of expected earnings regarding its phosphates operation may warrant a reversion of the outlook.

– The Vibes, April 19, 2023

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