WELCOME TO CAHYA MATA SARAWAK BERHAD 40 TH ANNUAL GENERAL MEETING

Transcription

1 WELCOME TO CAHYA MATA SARAWAK BERHAD 40 TH ANNUAL GENERAL MEETING KUCHING 30 APRIL 2015

2 GROUP MANAGING DIRECTOR S PRESENTATION Y BHG DATO RICHARD CURTIS KUCHING 30 APRIL 2015

3 GROUP KEY FINANCIALS Revenue PBT 1, RM million 1,600 1,400 1,200 1, ,013 1,203 1,417 1,674 RM million

4 GROUP KEY FINANCIALS EPS & ROE Balance Sheet RM sen % 9.37% 11.17% 8.80% 5.08% * % 11% 9% 7% 5% 3% 1% -1% RM million 2,000 1,800 1,600 1,400 1,200 1, ,812 1,654 1,416 1,480 1, times EPS ROE S/holders funds Cash Borrowing Gearings

5 OUR SHARE PRICE PERFORMANCE 31 March 2013 Price: RM3.02 Market Cap: RM1.0 bil 20 Dec 2013 Price: RM6.52 Market Cap: RM2.2 bil Ranked: No May 2014 Price: RM9.62 Market Cap: RM3.3 bil Ranked: No April 2015 Price # : RM5.00 Market Cap: RM5.3 bil Ranked: No. 56 *Ranking is based upon Market Capitalisation rate amongst Malaysian-listed companies # Share price adjusted after share split & bonus issue in June 2014

6 Dividend policy since November 2014 is a minimum of 40% PATNCI, subject to minimum of 2 sen per share and other considerations. DPS % DIVIDEND POLICY Gross DPS and Net Payout Ratio (%) 30.9% 31.3% 30.9% 40.0% 5 sen 15 sen 17 sen 17 sen 8.5 sen # Ordinary Dividend Special Dividend Net Payout Ratio (%) # Following the payment of an interim dividend of 1.5 sen per share of RM0.50 each, the Board of Directors had proposed to declare a final tax exempt (single-tier) dividend at this AGM of 7.0 sen per share of RM0.50 each 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Net Payout Ratio

7 2014 DIVISIONAL PERFORMANCE

8 RM million Cement Division Revenue PBT Improved results due to higher cement sales, improved operations, higher production volume & cement price adjustment Construction of new RM190 mil grinding plant began in 2014; production to commence by 1H 2016 For 2015, Division to invest some RM27.5 mil to improve its distribution capabilities

9 RM million Revenue PBT Improvement in results due to the supply of MSPU pipes, higher sales & recovery of bad debt Construction Materials & Trading Division By Q2 2015, annual production of Sibanyis quarry to increase from 600,000 MT to 900,000 MT Plans to purchase 2 more mobile premix plants (150 MT ph each) Gearing for potential demand growth linked to Pan- Borneo Highway

10 RM million Construction & Road Maintenance Division Revenue PBT Lower PBT due to increased project costs & a financial provision Invested in new machinery; implemented employees training; conducted division-wide teambuilding programmes in 2014 Contributions from Pan-Borneo Highway not yet quantifiable due to lack of project details Construction order book is approx. RM1 bil

11 RM million Revenue PBT Higher PBT due to increased land & property sales, and higher construction activities 46 Property Development Division To commence 2 nd phase B. Samariang (350 acres) between ; est. GDV RM475 mil ( ) The Isthmus (93 acres) working on niche waterfront residential enclave, hotel, tertiary education centre, petrol stations, commercial shops and 2 GBI-certified office buildings Piling works for Rivervale Residences in Stutong (Lot 9244) (est. GDV of RM250 mil) have begun

12 RM million Samalaju Development Division Revenue Division registered a drop in due to lower occupancy & rates PBT Township completed earthworks; construction of 1 st phase (160 units of apartment blocks) scheduled to complete by early 2016 Lodges repositioned to provide short & medium term accommodation in SIP

13 OM MATERIALS (SARAWAK) Strategic Investments Commercial production of 1 st phase (ferrosilicon alloys) achieved in Sept 2014 To-date 5 furnaces (out of 16) are in operation Full production of 1 st phase expected by 2H 2015; production of 2 nd phase (manganese alloys) to commence by 1H 2016 CMS increased its stake by 5% in April 2015

14 MALAYSIAN PHOSPHATE ADDITIVES (SARAWAK) Strategic Investments Ground clearing & earthworks began in Q Complex to be operational by 2H 2017; fully commissioned by 2H 2018 Advanced negotiations for EPC agreement, financing & PPA contracts are underway

15 Strategic Investments KKB ENGINEERING For FY 2014, KKB posted PATNCI of RM20.97 mil In Sept 2014, associate OceanMight secured the Tanjong Baram Project; expected to complete by Q2 2015

16 For FY 2014, K&N Kenanga registered PATNCI of RM29.51 mil Strategic Investments KIB now ranks the 10 th largest unit trust company in Malaysia Awarded the Best Performing Equity Malaysia Fund award for the 5-year and 10-year categories at Lipper Fund Awards 2015 (Malaysia) One of Top 3 brokerage houses in the country with one of the largest network of remisiers

17 Strategic Investments TPS continues to play a role in the development of the nation s future leaders No. of students approx. 600 with 132 new applications in 2014 New Tun Taib Hall to be inaugurated in May 2015

18 CMS OPUS PRIVATE EQUITY Strategic Investments As at 2014, CMS Opus had 7 investments with AUM totalling RM291 mil For FY 2014, CMS Opus returned investment capital amounting to RM10.17 mil including a gain of RM2.33 mil

19 GOING FORWARD

20 THE MACRO PICTURE FROM CMS VIEWPOINT SCORE projects are happening Global or national economic trends are unlikely to derail SCORE Malaysian GDP growth for 2015 is projected to be 4.5% - 5.5% Average Malaysian GDP growth projected over the next 4 years is 5% - 6% Critical fiscal reforms in Malaysia are being implemented (i.e. subsidy reforms & GST)

21 CMS STRATEGIC ROAD MAP Ride the Sarawak Growth Story through: Energy-Intensive Industry Investments Providing infrastructure, construction materials & related services across the State

22 Our ROAR V.2

23 Business Divisions ADVANCE Clinker Plant cost savings improve PBT Property Development project sales revenues/profits start flowing in Construction Division to have at least RM500 mil non-roads order books Samalaju starts sale of its properties

24 Strategic Investments ADVANCE OM Smelter in production Kenanga with lowered costs & bigger market share, sustainable profits grow KKB improved foundation for profitability from Petronas & water pipe contracts MPA financial close & construction start

25 Business Divisions ROAR V New 1 mil MT Cement grinding plant commissioned & demand rises from new dams & exports Property & Samalaju Development accelerate with less support from land sales Construction Materials & Trading to have established its new Engine(s) of Growth Construction & Road Maintenance to focus on niche projects with good returns

26 Strategic Investments ROAR V OM Smelter 1 st full year of profitable full production Kenanga & KKB profits floor at new higher levels plus growth potential MPA into commercial production CMS to be involved in 1 2 other major investments

27 CONCLUSIONS

28 PLANNING FOR OUR SHAREHOLDERS Adhere to our Dividend Policy Protect & grow our ROE & EPS via long-term sustainable growth strategies Continue to engage with the Investment Community to sustain investor interest Be Bursa s best proxy investment for Sarawak s long-term economic growth And continue to realise our vision To be the of Sarawak & Beyond for our 4 stakeholders

29 Thank You Y Bhg Datu Michael Ting On behalf of the Board, Management and Staff of CMS For serving on the Board of CMS and its subsidiaries since March 1999

30 40 Incredible Years of Growth & Development Our appreciation to all who contributed to CMS performance in past & present Our Employees in the CMS family For their dedication & hard work Our CMS Management Teams across the Group For their leadership, passion & drive All Government Agencies, Consultants, our Business Partners, Vendors & Suppliers For their support & guidance Our Board of Directors across the Group For their guidance & oversight Our Shareholders For their loyalty & support

31 Thank you!

32 QUESTIONS & ANSWERS Questions from Minority Shareholder Watchdog Group (MSWG)

33 QUESTION 1 On 2 April 2015, CMS announced that it had entered into Conditional Share Purchase Agreement with the State Financial Secretary on behalf of the State Government of Sarawak for the proposed acquisition of a 50% shareholding in Sacofa Sdn Bhd ( Sacofa ), a Sarawak-based telecommunications infrastructure & service company, for a total purchase consideration of RM186.8 mil to be satisfied entirely by cash. Sacofa was granted a 20-year concession to build, manage, lease & maintain telecommunications towers in Sarawak by the State Government of Sarawak in March 2002.

34 QUESTION 1 Who are the independent valuers for CMS & whether any independent valuation has been conducted on the assets of Sacofa & how the price has been arrived at? Our Response : The Main Market Listing Requirement ( MMLR ) states that a listed issuer is only required to undertake a formal valuation exercise (which involves engaging a valuation expert) where: 1. A transaction involves an acquisition or disposal of any real estate or any corporation which owns real estate; and 2. Any one of the percentage ratios of the transaction is: 25% or more, for a transaction falling under Part D of Chapter 10 of the MMLR; or 5% or more, for a related party transaction falling under Part E of Chapter 10 of the MMLR

35 QUESTION 1 Our Response : We would like to highlight that: The transaction does not involve any acquisition of real estate nor does Sacofa fall under the definition of a corporation which owns real estate as defined under paragraph (2) of the MMLR The maximum percentage ratio for the transaction is 11.67% The transaction is not a related party transaction As such, no independent valuer was required to be engaged by CMS for this transaction. However, in assessing the purchase consideration for the acquisition, CMS had taken into consideration, among other things, the current & historical profit after tax, net tangible assets, future prospects of Sacofa & the potential dilution in the shareholdings of CMS should the outstanding warrants in Sacofa be exercised.

36 QUESTION 1 How would the Sacofa s acquisition fit into CMS vision & also considering that the concession of Sacofa would have only another seven years to expire? What is the probability of the concession being renewed after the expiry date? Our Response : CMS vision is to participate strongly in Sarawak s future growth spearheaded by SCORE (Sarawak Corridor of Renewable Energy) through investments in energy-intensive industries & in the related infrastructure, construction materials and related products & services needed within the State. Thus CMS planned investment in Sacofa fits clearly within this vision. It would be premature to comment at this stage on any renewal or extension of Sacofa s concession as the acquisition is presently subject to a due diligence and other conditions precedent.

37 QUESTION 1 What is the Board s plan beyond 2022 in respect of the construction of more towers? Our Response : It would be premature to comment at this stage on the construction of more towers as the acquisition is presently subject to a due diligence and other conditions precedent. What would be the estimated recurring income & percentage contribution to the Group s total revenue annually? Our Response : It would be premature to comment at this stage on the estimated future income & the contribution to the Group s total revenue annually but, it is expected to be positive.

38 QUESTION 1 How many other players are involved in this business & what is the prospect of the business in East Malaysia? How would Sacofa position itself against other competitors? Our Response : This is commercially sensitive information & further, it would be premature to comment on the prospects for & the positioning of Sacofa at this stage as the acquisition is presently subject to a due diligence & other conditions precedent which will enable us to firm up our views and strategies on these issues.

39 QUESTION 2 CMS, with sizeable cash reserves & very low gearing, is in a favourable position to explore other opportunities within SCORE? Our Response : This is correct and investments within, or consequential on, SCORE remain a key area of focus. We regularly both develop internally & receive investment opportunities. We apply strict criteria in our assessment before we proceed so as to ensure they create long-term sustainable shareholder value.

40 QUESTION 2 To date, how many and what type of investment/business opportunities has CMS explored within SCORE? Our Response : This is an ongoing process, which we feel is best answered not in terms of quantity & type but in terms of focus. The focus has been twofold; firstly, on energy-intensive industrial investments, such as CMS participation in the OM Sarawak ferrosilicon & manganese smelters and in the Malaysian Phosphate Additives planned phosphate complex; and secondly, on the infrastructure, construction materials and related products & services required across the State.

41 QUESTION 2 Apart from SCORE, is there any latest significant development from non-score areas? Our Response : We have an ongoing process to make appropriate investments within our core business divisions to position them to meet Sarawak s accelerating growth needs. These include our 1 mil MT of additional cement grinding capacity, the 2,500-acre Samalaju Eco Park township, our 50% capacity increase in our Sebanyis quarry, new mobile premix plants & our planned investment in Sacofa.

42 QUESTION 3 We noted that with the third plant in its stable, CMS Cement s total production will increase by almost 60%. CMS Cement will also make additional investments amounting to some RM17 mil in 2015 to further improve its distribution capabilities. With Sarawak experiencing the accelerating economic progress, please elaborate on the involvement (e.g. projects, development, etc.) of CMS Cement in meeting the demand in the State and does the Board foresee that the increase in capacity of 60% is sufficient? What is the targeted combined average Utilisation Factor (UF%) of cement plants in the next few years?

43 QUESTION 3 Our Response : The upcoming additional cement grinding capacity will enable CMS Cement not just to meet demand growth within the State for the next years but also to provide reserve capacity to limit the risk of any supply interruptions due to unscheduled shutdowns at its other two plants as well as to open up the potential of some modest levels of cement exports into adjoining markets. With the third grinding plant coming on stream by 1Q 2016, the targeted average utilization factor at our cement plants will reduce to a level that will enable more much needed maintenance & operational improvements to be implemented in the two older plants without restricting the supply of locally produced cement. The UF% will be a function of cement sales over available production capacity. At this stage there are too many variables for any meaningful UF% to be cited.

44 QUESTION 3 Apart from Sarawak, is there any plan to expand the cement business to other states and/or countries? Our Response : From time to time, proposals are received inviting us to consider other states/countries but none are being actively considered at this stage, our current focus being to reinforce our logistics capabilities, to increase our grinding capacity within Sarawak & to enhance our operational efficiencies.

45 QUESTION 3 How much more capital expenditure is expected to be incurred in the near future with regard to improving the distribution capabilities? Our Response : We have in our budgets for 2015, RM27.5 mil earmarked for improvements to our logistics capabilities, some of which is carried forward from We are looking at further strengthening our distribution i.e. shiploading & storage capabilities for the northern region of the state however it is still at the preliminary study stage. It is envisaged that there will be further expenditure in but not to a level that would affect this Division s performance or our cash position.

46 QUESTION 4 What is the latest order book under Construction & Road Maintenance Division? Our Response : The current order book is approximately RM1 bil. This figure is based on the current road lengths being maintained under the two road maintenance concessions & includes all construction contracts awarded. The quantum does not exclude minority interests & where the contract is subcontracted internally to another group entity this is excluded.

47 QUESTION 4 To what extent has the Division participated in the Pan Borneo Highway project that has started recently? Our Response : The Pan Borneo Highway project is still at early stages in regard to the aspects in which CMS could be expected to play a role. The areas where CMS could play a role involve the supply of construction materials & the provision of construction services especially within the Southern and Central regions of Sarawak.

48 What is the total gross development value for existing property developments & how much would be further launched this year? Our Response : The current GDV for existing property developments is RM225 mil with another RM190 mil expected to be launched this year. What has been the current take-up rate for any recent launches of property development? Our Response : QUESTION 5 The current take up rate is approximately 40-50% based on recent launches in the last 12 months.

49 QUESTION 5 How many acres of development land does the Group currently have & how long will it take the Division to sustain the development if the landbank is not further increased? Our Response : The Division currently has 3,940 acres approximately of development land & is always actively looking out for other suitable parcels. This land bank is expected to be able to sustain the Division s development for years, even if no other parcels are acquired to supplement this landbank.

50 QUESTION 6 In FY 2014, the Division registered a sharp 65% drop in PBT (excluding associates) to RM9.46 mil as compared to PBT of RM26.72 mil previously, on the back of lower revenue due to lower occupancy rates. To date, what action has been taken by the Division to boost the tenancy and results achieved? Our Response : The Division s occupancy of the lodges had been largely dependent on a single customer whose project has finished. The lodges have now been both written down & re-configured to meet the needs of current & future customers, many of whom will be requiring either periodic or medium-term accommodation pending completion of the adjoining township s residential facilities. Some of these will be involved in the construction of upcoming projects but many will be operational workers & supervisors in completed plants. Results are also set to improve once development & sales in the Samalaju Eco Park township & its other adjoining parcels totaling approximately 2,500 acres commences later this year.

51 QUESTIONS & ANSWERS Questions from EPF

52 QUESTION 1 The concession agreement for its road maintenance is expiring in Is CMS expecting for it to be renewed, and if so for how long? Our Response : CMS is working proactively to secure a renewal or at least an extension of these two concessions. At this stage, it would be premature to comment further.

53 QUESTION 2 For RM27 bil Pan Borneo project, apart from being the supplier of materials such as cement, bitumen, premixes, etc., is CMS interested to undertake the construction works or road maintenance as well? Our Response : CMS, with its extensive experience & resources, is interested in undertaking both construction works & road maintenance for the Pan Borneo project.

54 QUESTION 3 CMS has huge cash pile of RM 830 mil as at 31 December What are CMS plans on this going forward? Our Response : CMS recognises it has a substantial cash pile & its approach is twofold. Firstly. it has recently revised its dividend policy to increase the payout % of PATNCI from its earlier policy level of 30% to 40%. Secondly, it is looking for investment & business growth opportunities primarily within Sarawak so as to participate strongly in the Sarawak growth story spearheaded by SCORE, the Sarawak Corridor of Renewable Energy. This focus is itself twofold; firstly through investments in energy-intensive industrial investments, such as CMS participation in the OM Sarawak ferrosilicon & manganese alloys smelters, and in the Malaysian Phosphate Additives planned phosphate complex; and secondly on the infrastructure, construction materials and related services required across the State. Within this focus comes our 1 mil MT Cement grinding plant, our 50% capacity increase in our Sibanyis quarry, the 2,500-acre Samalaju Eco Park township & our planned investment in Sacofa.

55 QUESTION 4 Is the proposed acquisition of Sacofa require shareholders' approval? And when is the deal is expected to be materialised? And when can we see Sacofa's earnings to reflect on CMS bottom-line? Our Response : As the highest percentage ratio applicable to the proposed acquisition of Sacofa pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements is below 25% & as it is also not a related transaction, the proposed acquisition of Sacofa does not require CMS shareholders approval. It is expected to be completed by the 2H 2015 & from then it is expected to be reflected in CMS bottom-line.

56 QUESTION 5 Regarding the issue of illegal housing that has brought down CMS' Workers Camp occupancy rate, I understand that the previous total bed space capacity had reached around 9,000 beds. Now, CMS is planning to cater for those seeking medium to long-term accommodation in SIP. What kind of market is CMS targeting, would that be of the labour workers, the upper management workers, expatriates, etc.?

57 QUESTION 5 Our Response : The CMS workers lodge business has been refocused to meet the needs not so much of construction workers & their supervisors building plants but towards demand for periodic and/or medium-term accommodation for the operational workers & their supervisory staff in completed plants. Supervisory workers include middle management & expatriate workers. The requirements of operational staff are more long-term. Therefore, we have reconfigured the accommodation spaces at the Lodges to make them more conducive for longer term stays. In the process, the total number of beds have been reduced to 5,750 with 1,500 committed to OM Sarawak for their operational workforce with about 300 beds for other tenants. We are confident to attract growing numbers of operational & construction workers from other industries in Samalaju to stay in our Lodges.

58 QUESTION 6 CMS is now the sole supplier of cement & clinker, and with the recent move of acquiring Sacofa, would enhance more the diversification of CMS. Is there any more diversification plan in the near future? Our Response : CMS plans for investments & business growth, whether by diversification or otherwise, have been answered in Question 3 above.

59 QUESTION 7 Within the Samalaju area, is there any more plants to tie up with a local or foreign player? Our Response : CMS is always looking at business opportunities within its strategic focus, as outlined above, and thus another investment within the Samalaju area, either alone or with a foreign or local player, cannot be ruled out and, if any such tie up or investment was to take place, announcements would be made as appropriate.

60 QUESTION 8 Under the Cash Flow from operating activities, CMS has recorded RM 414 mil in 2014, almost double the figure in 2013 of RM 235 mil. Would that be a one-off or can we expect that kind of expansion from CMS going forward? Our Response : The increase in net cash from operating activities from RM236 mil in 2013 to RM414 mill in 2014 was primarily due to the timing of changes in working capital particularly in respect of payables, receivables & inventories, which are shown on page 100 of the Annual Report. It was neither a one-off nor an expansion of the Group.

61 Thank you!