It said the termination has “limited impact” on the Sarawak-based conglomerate’s financials as Cahya Mata Phosphate Industries Sdn Bhd (CMPI) has yet to commence commercial operations as it is in the process of obtaining approvals and licences to begin selling.
CMPI has 10,000 drums of phosphorus in its inventory there.
MIDF Research maintained a “buy” call with an unchanged TP of RM1.50 based on a forward price-earnings (PE) of eight times to its financial year 2024 forecast (FY2024F) earnings per share (EPS) of 18.7 sen.
“We are making no changes to our forecasts for now as we await further clarity from management, which is expected to hold a briefing on this,” MIDF said in a note today.
The research house said there may be a delay in the commercialisation of the phosphate plant due to the arbitration of the dispute which may take up to two years.
MIDF noted that Cahya Mata’s medium to long-term outlook remains strong with the expected improvement in cement demand, especially with planned development projects including Indonesia’s upcoming new capital in Nusantara, Kalimantan.
Court dismisses CMPI’s bid
The Court of Appeal dismissed CMPI’s bid yesterday for a preservation order to bar Sesco from terminating power supply to the plant.
It sought the preservation order to maintain the status quo, pending its appeal against the Kuching High Court’s decision in June to dismiss its interim injunction application.
Following the court’s decision not to grant the preservation order, Sesco terminated the electricity supply to the plant at 12.30pm on July 10, according to Cahya Mata’s filing with Bursa Malaysia yesterday.
The group said the power shutdown is not expected to have a material business, financial or operational impact on the group.
CMPI and Sesco have been embroiled in the dispute related to a power purchase agreement (PPA) dated Jan 15, 2019, since last November.
According to Cahya Mata, the group must either take a minimum electric supply capacity based on the computation in the PPA upon commencement of commercial operations of the phosphate plant, or pay for the electricity consumption shortfall.
The disagreement began when Sesco billed the group for cumulative electricity consumption shortfall and payment security shortfall amounting to RM266 million as at end-December last year, despite Cahya Mata contending the plant is not deemed to have commenced commercial operations.
Main Market-listed Cahya Mata’s portfolio spans over 35 companies involved in cement manufacturing, phosphates manufacturing, oil tools, green technology, construction materials, trading, construction, road maintenance, property development, financial services, telco infrastructure and other services.
At 4.40pm, its shares rose one sen or 0.93% at RM1.07, giving Cahya Mata a market capitalisation of RM1.15 billion.
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