- CB Industrial Product Holding Bhd (CBIP) announced that it has won an RM35mil (US$11.2mil) contract from PT Astra Agro Lestari to build a 45 tonnes/hour Modipalm mill.

- We view this positively as the contract would increase CBIP’s construction order book and sustain its net profit.

- We think that CBIP may secure about RM350mil to RM400mil worth of contracts in FY13F, which should support the group’s profit growth in the coming two years.

- CBIP’s unbilled construction revenue stood at RM349mil as at end-December 2012. This is about 0.7x of CBIP’s FY12 construction turnover.

- Apart from mill construction, CBIP is expected to receive a boost in its boiler division due to the expansion in production capacity.

- Recall that the group’s subsidiary, Advance Boilers Sdn Bhd proposed to acquire a plant in Meru, Klang for RM36mil in April 2013.

- Out of CBIP’s contracts in-hand of RM902mil as at end-Sept 2012, about 20% were boiler contracts.

- We maintain a BUY on CBIP for its undemanding valuations and proven track record in the mill construction industry.

- The group is also envisaged to benefit from steel costs, which have remained subdued this year.

Source: AmeSecurities