- CB Industrial Product Holding Bhd (CBIP) announced that it has received a US$3.4mil or RM10.7mil contract from Industrial Aceitera De Casanare Sucursal Colombia.

- The contract involves the turnkey construction of a 15 tonnes per hour Modipalm palm oil mill.

- We view the contract positively as it would help replenish CBIP’s construction order book and sustain its profitability.

- Although the value of the contract is small, we reckon that it is a first step towards establishing CBIP’s track record in Colombia.

- Roughly 5% of CBIP’s customers are from Central America and Africa. A large 95% of the group’s customers are Malaysian and Indonesian plantation companies.

- The contract from Industrial Aceitera is estimated to take about a year to complete due to the small size of the palm oil mill.

- Most palm oil mills would take between 12 and 18 months to complete.

- As at end-March 2013, CBIP’s unbilled sales stood at RM390mil, which should sustain the group’s profits for another 1 ½ years.

- Year-to-date, we estimate that CBIP has secured about RM150mil to RM200mil worth of palm oil mill contracts.

- The group is hopeful that it would be able to win RM350mil to RM450mil contracts in FY13F versus RM280mil in FY12.

- We maintain BUY on CBIP for its undemanding valuation as reflected in its FY14F PE of 8.2x.

Source: AmeSecurities