-  CB Industrial Product Holding Bhd (CBIP) announced that it has received a RM46mil contract to build a 60 tonnes per hour Modipalm mill in Papua New Guinea for Rimbunan Hijau Group.

-  This is CBIP’s first announcement of an award of a contract this year.

-  We view the contract positively as it would help replenish the group’s mill construction order book.

-  Generally, each contract lasts between 12 and 18 months.

-  As at end-September 2013, unbilled sales of CBIP’s mill construction division stood at RM430mil. This is expected to sustain the group’s revenue and earnings for almost a year.

-  We believe that the above contract is CBIP’s second award from the Rimbunan Hijau Group.

-  In June 2012, CBIP received an RM40mil contract from Jaya Tiasa Holdings Bhd to supply and install mechanical and engineering works of a 120 tonnes per hour mill in Sarawak.

-  We have assumed that CBIP would receive RM320mil contracts in FY14F, which is the same as FY13.

-  Apart from the mill construction division, CBIP’s profit growth is also expected to be underpinned by its retro-fitting division.

-  The unit received an RM136.8mil contract last year and its unbilled sales stood at RM285mil as at end-September 2013.

-  Currently, we have a BUY recommendation on CBIP. We will be reviewing our recommendation and fair value on the group.

Source: AmeSecurities