- CB Industrial Product Holding Bhd (CBIP) announced that it has secured a contract from PT Niagamas Gemilang to design, commission and construct a Modipalm mill.

- The capacity of the mill is 30 tonnes per hour but it can be expanded to 60 tonnes per hour.

- The contract value is RM25.5mil. This is CBIP’s third announcement of a new Modipalm contract this year.

- In early April 2015, CBIP received a RM49.8mil contract from United Plantations Bhd while in January 2015, the group won a RM31.3mil contract from Thai Eastern Trat Co Ltd.

- In the Bursa announcement, CBIP said that the contract from PT Niagamas Gemilang is the 100th Modipalm mill order placed by its clients since its inception a decade ago.

- We view the award of the contract positively as it would replenish CBIP’s order book and sustain its profits. We estimate that CBIP has received RM152.9mil contracts year-to-date.

- We have assumed that the group would win RM270mil new contracts in FY15F, which is the same as FY14.

- We are not forecasting any growth in new contracts in FY15F as some plantation companies may defer or postpone their capex plans to build palm oil mills in view of weak CPO prices.

- Unbilled construction order book of CBIP’s mill division stood at RM445mil as at end- December 2014 compared with RM500mil as at end-September 2014.

- The unbilled sales of RM445mil are expected to last the group for another 12 months.

- Maintain HOLD on CBIP. The group is currently trading at fully diluted FY15F PE of 13.2x and FY16F PE of 12.1x.

Source: AmeSecurities Research - 17 Apr 2015