Cahya Mata Sarawak Bhd (CMS), which means “child of Sarawak” (or, if you consider each word separately, the “light in the eye of Sarawak”) in Malay was once just a humble producer of cement.
It started out manufacturing ordinary Portland cement (OPC) and went on to become the first Sarawak-based firm to be listed on the local stock exchange. CMS, then known as Cement Manufacturers Sarawak, made its debut on the then-Kuala Lumpur Stock Exchange in 1989.
Five years later, the company started to branch out into other areas. It rapidly became Sarawak’s largest player in the financial services and infrastructure development industries. As it was no longer a single-product company, the name was no longer suitable. It was time for the company to have a handle that reflected its breadth and diversity. In 1996, it went from being Cement Manufacturers Sarawak to Cahya Mata Sarawak. And since then it has gone from strength to strength.
Of course, a large part of its allure has been the people behind it. CMS is closely linked to the family of Sarawak Chief Minister Tan Sri Taib Mahmud.
Taib’s children and his late wife, Lejla Taib, collectively own more than 42% of the company, according to its 2010 annual report. Taib’s eldest son Datuk Seri Mahmud Abu Bekir Taib, CMS deputy chairman, has an 8.92% stake in the company while his younger son, Datuk Seri Sulaiman Abdul Rahman Taib, who was chairman until 2008, holds 8.94%.
CMS has won many major projects in the state as well as the rest of the country. According to its filings with Bursa Malaysia, CMS and its subsidiaries have won over RM1 billion worth of projects from the state and the federal government since end-2004. It plays a major role in the production of cement and other building materials which would account in part for its prominence as a construction firm in the state.
As a conglomerate it runs the gamut with interests in construction, steel manufacturing, road maintenance, property development and financial services.
Given its position and prominence, CMS is expected to win a substantial portion of the construction jobs within the Sarawak Corridor of Renewable Energy (Score). This year marks the start of the second priority phase (2011 to 2015) for road connectivity under Score, although Phase One has yet to be completed. This ties in with the 10th Malaysia Plan’s RM4.6 billion allocation to build more roads and widen electricity and clean water reach to households in Sarawak.
It is worth noting that there were tenders for 27 road packages worth at least RM2 billion closed last year. With the possibility of bagging more jobs, it is no wonder that CMS has always been on the radar of analysts when it comes to a good Sarawak play.
CMS’ most high-profile project so far is the RM7 billion aluminium smelter plant at Samalaju, Sarawak. The smelter is said to source power from the Bakun hydro-electric dam.
CMS subsidiary Similajau Aluminium Industries Sdn Bhd has a 40% interest in the project with the remaining 60% held by Rio Tinto Alcan, a unit of global mining giant Rio Tinto. The smelter will have an initial production capacity of 720,000 tonnes per year with potential output to be more than doubled to 1.5 million tonnes per year.
Given the size of the smelter project, CMS has been building its cash pile and cleaning its balance sheet. It recently issued RM400 million in bonds and preference shares to refinance its borrowings and for working capital. The sale of its stake in UBG Bhd to Petrosaudi International Ltd for RM465.52 million late last year also helped boost its cash pile.
Industry observers say the corporate exercises are the latest in a string of deals that CMS has undertaken to extract cash from its investments.
To recap, UBG, the financial services arm of CMS group formerly known as Utama Banking Group Bhd, acquired a 32.13% stake in RHB banking group in 2003, resulting in a merger between RHB Bank and Bank Utama (Malaysia) Bhd.
In 2007, UBG sold its entire stake in RHB to the Employees Provident Fund (EPF) for RM2.25 billion and, with the proceeds, made a capital repayment of RM1.37 billion, leaving it with RM821.7 million in cash and no core business.
CMS has constantly reinvented itself over the years according to the fortunes of the state. Now that it has exited banking, it will be interesting to see what this sleeping giant takes on next.
Written by Isabelle Francis, theedgemalaysia.com
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