- CB Industrial Product Holding Bhd (CBIP) has proposed to acquire a parcel of land measuring 4.05 hectares, together with the plant, machinery and buildings on it, for RM36mil. The buildings include two workshops and a three-storey office building.

- The land is located in Meru, Klang. CBIP’s existing office and plant are currently located in Teluk Panglima Garang, Selangor.

- We believe that the new acquisition would help CBIP expand its production capacity. This would allow the group to accept more mill construction and boiler contracts.

- Presently, CBIP has the capacity to produce about 14 mills annually. The group’s plant at Teluk Panglima Garang has a factory space of 66,000 sq m.

- The proposed acquisition would be undertaken by CBIP’s subsidiary, Advance Boilers Sdn Bhd.

- Hence, there is a possibility that all of the boiler operations would be carried out at the new place in the future.

- Out of CBIP’s total contacts in-hand of RM901.8mil as at end-September 2012, about 20% were boiler contracts. The rest of the contracts were in respect of palm oil mills. CBIP’s unbilled sales stood at RM328.9mil as at end-September 2012.

- Some of CBIP’s boiler customers are Wilmar International and Sime Darby.

- Financing the proposed acquisition is not expected to be an issue as CBIP had gross cash of RM191.1mil as at end-FY12.

- We maintain a BUY on CBIP for its cheap valuations as reflected in the FY13F-FY14F PEs of 7x to 8x.

Source: AmeSecurities