Highlights

HLBank Research Highlights

Author: HLInvest   |   Latest post: Fri, 30 Jul 2021, 10:08 AM

 

CB Industrial Product - Better-than-expected

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CBIP’s 3Q20 core net profit of RM14.5m (vs. core net profits of RM1.7m in 2Q20 and RM1.1m in 3Q19) took 9M20’s sum to RM28.5m (+115.1%). The results beat expectations, accounting for 85-85.8% of our and consensus full-year estimates, due mainly to better-than-expected JV and associate earnings (arising from high palm product prices). We raise our FY20 core net profit estimate by 15.6% to RM38.8m mainly to reflect a slightly higher EBIT margin assumption at oil mill engineering segment and higher FFB selling price realised YTD. We maintain our FY21-22 core net profit forecasts, pending a review on our CPO price assumptions post results season. We maintain our HOLD rating on CBIP, with a slightly higher SOP-derived TP of RM0.87 (from RM0.83 earlier), as we updated its latest net debt position.

Beat expectations. 3Q20 core net profit of RM14.5m (vs. core net profits of RM1.7m in 2Q20 and RM1.1m in 3Q19) took 9M20’s sum to RM28.5m (+115.1%). The results beat expectations, accounting for 85-85.8% of our and consensus full-year estimates, due mainly to better-than-expected JV and associate earnings (arising from high palm product prices).

Exceptional items (EIs) in 9M20. 9M20 core net profit of RM14.5m was arrived after adjusting for (i) RM12.5m tax penalty imposed on SPV division, (ii) RM8.8m disposal gain, (iii) RM1.6m forex gain, and (iv) RM0.1m fair value gain on biological assets.

QoQ. Core net profit surged 7.3x to RM14.5m in 3Q2, boosted mainly by improved performance at oil mill engineering segment (arising mainly from margin improvement), turnaround at JV and associates (on higher palm product prices), and reduced losses at biofuel plant.

YoY. Core net profit surged 12.2x to RM14.5m in 3Q20 (amid a low base), boosted mainly by improved margin at oil mill engineering division and turnaround at JV and associates (on higher palm product prices), albeit partly negated by losses at biofuel plant.

YTD. 9M20 core net profit more than doubled to RM28.5m (from RM13.3m SPLY), boosted mainly by margin expansion at oil mill engineering segment, and reduced losses at upstream plantation segment (due to higher palm product prices).

Orderbook. Orderboook at oil mill engineering segment declined further to RM313m as at 30 Sep 2020 (from RM327m as at 30 Jun 2020), while orderbook at SPV segment fell marginally to RM71m as at 30 Sep 2020 (from RM75m as at 30 Jun 2020).

Forecast. We raise our FY20 core net profit estimate by 15.6% to RM38.8m mainly to reflect a slightly higher EBIT margin assumption at oil mill engineering segment and higher FFB selling price realised YTD. We maintain our FY21-22 core net profit forecasts, pending a review on our CPO price assumptions post results season.

Maintain HOLD with slightly higher SOP-derived TP of RM0.87. We maintain our HOLD rating on CBIP, with a slightly higher SOP-derived TP of RM0.87 (from RM0.83 earlier), as we updated its latest net debt position. There is an upside bias to our TP, pending a post results season review on our average CPO price assumption.

Source: Hong Leong Investment Bank Research - 30 Nov 2020

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CBIP 1.25 -0.04 (3.10%) 191,900 

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