- CB Industrial Product Holding Bhd (CBIP) has received a contract from Sime Darby Plantation Sdn Bhd to build a 30 tonnes per hour Modipalm mill in Liberia for RM38.5mil.

- We view this positively as it would help replenish CBIP’s construction order book. This is CBIP’s second announcement of a contract this year.

- Also we reckon that as Sime Darby’s mature areas in Liberia increase, the group would need to build more mills. CBIP is well-positioned to benefit from this.

- In March 2014, CBIP won an RM46mil contract from Rimbunan Hijau Group to build a 60 tonner per hour Modipalm mill in Papua New Guinea.

- As at end-Dec 2013, unbilled sales of CBIP’s mill construction division was RM440mil. Unbilled sales of the group’s retro-fitting division were RM215mil.

- In our earnings forecast, we have assumed that CBIP would receive RM320mil contracts in FY14F, which is the same as FY13. Each palm oil mill contract lasts for 12 to 18 months.

- It appears that a growing proportion of CBIP’s palm oil mill contracts are coming from new markets like Africa, Papua New Guinea and Central America.

- This would help cushion any slowdown in the award of palm oil mill contracts from Indonesia.

- New plantings have eased in Indonesia in the past few years due to the longer approval process and scrutiny from the environmental organisations.

- We will be reviewing either our recommendation or fair value on CBIP. The group is currently trading at a FY14F PE of 12.8x. 

Source: AmeSecurities