Cahya Mata Sarawak Berhad (CMS) was viewed to be heavily linked to the family of the current Head of State, Tun Pehin Sri Abdul Taib Mahmud. Such was the perception when the company was incepted, and it remains so to some who have not been following the company’s developments.
The Group has long undertaken a transformation and became an investable company based on merits.
Dato Isaac Lugun, the present CMS Group Managing Director, has dispelled this based on the Company’s institutionalized shareholdings and management representation.
Taib’s family owns 23 per cent equity
“We have over 50 per cent shareholdings held under local and foreign institutions and this has been quite a stable trend. We also have a team of professional management operating on a meritocracy-based culture.
“When I first joined the company in 1996, Tun Taib’s family had more than 60 per cent shareholdings but now, they have pared down their interest to about 23 per cent,” Isaac pointed out, following a strategic restructuring to address the proprietorship status of the company.
He said, to date, all executive positions and the subsidiary boards are filled by professionals who bring a wealth of expertise and experience to the table. Dato Sri Mahmud Bekir Taib is the only family member who remains on the board and he holds a non-executive capacity as deputy chairman.
According to the present breakdown of CMS shareholdings, local institutional funds hold 47 per cent while foreign funds hold 8 per cent.
Government-linked investment companies hold almost 33 per cent. Among the GLCs which holds substantial stakes are Employees Provident (EPF), Tabung Haji (TH) and Sarawak Economic Development Corporation (SEDC).
Non-GLCs including large insurance funds and asset managers own 14 per cent. Reputable large foreign shareholders such as Norges Bank Investment Management, Vanguard and Dimensional Funds also featured as top 30 shareholders.
“We are proud of the fact that we have built a substantial following from reputable local and foreign institutional investors. This speaks of their confidence in us as a well-managed company with a clear growth path.”
FTSE4Good Bursa Malaysia index
Isaac also disclosed since CMS has been prioritising good corporate practices and good governance, it has successfully qualified as a green lane policyholder in Bursa Malaysia.
“We are pleased to note that CMS today is the only company from Sarawak on the ‘FTSE4Good Bursa Malaysia index’.
In December 2014, Bursa Malaysia and FTSE (Financial Times Stock Exchange Group) launched an Environmental, Social and Governance (ESG) index — FTSE4Good Bursa Malaysia Index — for the Malaysian market.
It is aimed at supporting investors in making ESG investments in Malaysian listed companies, increasing the profile and exposure of companies with leading ESG practices, encouraging best practice disclosure and supporting the transition to lower carbon and more sustainable economy.
“They look at all the top companies in Malaysia and assess them based on their corporate practices, good governance, environmental practices and social outreach.”
“In our case, we’re assessed annually to stay on the index. Currently, there are 73 Malaysian companies with the index, including CMS.”
Isaac believed that CMS’s inclusion in the FTSE4Good Bursa Malaysia index speaks volumes of its creditable corporate practice and responsibility, enabling the company to attract international investors.
“Because we are a component of this index, investors know we have already been assessed and are compliant with good governance, good corporate practices and high standards of disclosure. We have been a constituent for four consecutive years, with our latest ranking topping the previous one.”
Debunking myth of monopoly
On the production of cement, he said since the company is the only cement player in Sarawak, there is an assumption that it is a monopoly in supplying cement to the state.
“But the fact is that we are not a protected cement monopoly. Anyone can come to Sarawak and apply for a licence to set up a cement plant or export cement into Sarawak as there are no restrictions. There are competitors who have attempted to supply to Sarawak, however, they didn’t find it feasible as the market is limited.”
Isaac reiterated that to remain resilient, CMS is constantly strengthening its position in the cement supply chain.
“We have invested in cement production capacity of 2.75 million tonnes p.a. to capture the demand from Sarawak, especially with ongoing projects like the Baleh dam which will need about 400,000 tonnes in the next three years.”
Isaac said CMS could not increase selling prices despite the fact that raw material costs has significantly risen.
“The price of imported clinker has increased by more than 20 per cent in 2019,” Isaac stated.
Isaac revealed that under the Pakatan Harapan (PH) federal government, CMS was scrutinised and investigated for its business transactions.
“We are pleased to have been cleared in the previous audit conducted by the federal government with regards to our pricing policy tracking back 10 years. There were no findings of misconduct in our business practices.”
Similarly, for road maintenance, Isaac said he welcomes healthy competition from other players.
“I always believe competition drives efficiency. I think the cake is big enough for two or three more companies to share. We can’t deter competition in a free market. However, we can defend our position by staying ahead of the game through operational efficiency and quality delivery.”
CMS Group is a leading corporation listed on the Main Market of the Malaysian stock exchange, Bursa Malaysia, and is a major private-sector player in Sarawak, the largest State in Malaysia.
Over time, CMS has evolved from a single product manufacturer of cement (beginning in 1974) to become a corporation focused on its vision “To Become the Pride of Sarawak & Beyond”.
Today, CMS’s portfolio spans over 35 companies involved in the manufacturing and trading of cement and construction materials; construction; road maintenance; property and infrastructure development; financial services; education; steel and pipe fabrication plus installation; ferro silicon and manganese smelting; and telecommunication infrastructure.— DayakDaily