-  CB Industrial Product Holding Bhd (CBIP) announced that it has received a US$12.9mil (RM41.1mil) contract from PT Jas Mulia to build a Modipalm mill, which will have a capacity of 60 tonnes per hour.

-  PT Jas Mulia is a plantation company with operations in South Sulawesi.

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

-  We reckon that the contract would take 12 to 15 months to be completed. Its earnings would be reflected in CBIP’s FY15F numbers.

-  Including PT Jas Mulia, we estimate that CBIP has secured RM161mil mill construction contracts year-to-date.

-  We have assumed that CBIP would receive RM350mil contracts in FY14F compared with RM320mil in FY13.

-  As at end-March 2014, the group’s unbilled mill construction sales stood at RM488mil. This is about 1.4x of CBIP’s annual mill construction revenue.

-  We believe that CBIP is poised to secure more overseas contracts.

-  About 25% to 30% of the group’s mill construction contracts are expected to come from South America, Africa and Papua New Guinea.

-  The balance 70% to 75% of the contracts is anticipated to be awarded by Malaysian and Indonesian companies.

-  Maintain BUY on CBIP. The group is currently trading at an undemanding FY14F PE of 12.9x.

Source: AmeSecurities