- CB Industrial Product Holding Bhd (CBIP) has received RM105.5mil contracts from subsidiaries of Prosper Group.

- The first contract, which is worth RM57mil, is in respect of a 60 tonnes per hour Modipalm mill in Papua New Guinea. The second contract, which is worth RM48.5mil, is for the construction of a mill of a similar size in Malaysia.

- We view the awards of the contracts positively as it would replenish CBIP’s order book and sustain its profitability in FY15F.

- Year-to-date, we estimate that CBIP has received more than RM300mil worth of contracts. We have assumed that the group would be awarded RM350mil worth of contracts in FY14F versus RM320mil in FY13.

- As at end-March 2014, unbilled sales of CBIP’s manufacturing division stood at RM488mil while unbilled sales of its retro-fitting division was RM187mil.

- CBIP is gaining traction in countries like South/Central America, Papua New Guinea and Africa. About 20% to 30% of the group’s contracts in FY14F are expected to come from these countries. Indonesia and Malaysia are envisaged to account for the balance 70% to 80% of CBIP’s contracts.

- Higher number of contracts from Central/South America and Papua New Guinea would help cushion a potential slowdown in Indonesia.

- New plantings in Indonesia have eased over the past few years due to scrutiny from environmental organisations and compliance with RSPO (Roundtable for Sustainable Palm Oil) guidelines.

- Maintain BUY on CBIP with an unchanged fair value of RM5.15/share.

Source: AmeSecurities