- CB Industrial Product Holding Bhd (CBIP) has received a US$21.0mil or RM74.9mil contract from PT Sinar Mas Group to carry out mechanical, civil and electrical works for a 40/80 tonnes per hour Modipalm mill in Liberia.

- This is CBIP’s fourth announcement of a contract this year. Including this contract, we estimate that CBIP has received more than RM250mil contracts this year.

- Although CBIP is close to achieving our assumption of RM270mil contracts for FY15F, we are not revising the group’s FY15F earnings forecast yet. CBIP received RM270mil contracts in FY14 compared with RM320mil in FY13.

- We view the contract from PT Sinar Mas positively as it would replenish CBIP’s order book and sustain its profitability. Each palm oil mill contract is expected to last CBIP between 12 and 18 months.

- As at end-December 2014, unbilled sales of CBIP’s mill construction division stood at RM445mil.

- Also, the mechanical and electrical works portion of the contract from PT Sinar Mas is likely to command higher profit margins compared with just a civil construction contract.

- CBIP has also announced a first single-tier interim dividend of 3 sen per share ahead of its 1QFY15 results at the end of the month. The entitlement and payment dates will be announced later.

- We have assumed a gross DPS of 7 sen for CBIP in FY15F compared with 8 sen in FY14. The gross DPS of 7 sen translates into a decent dividend yield of 3.4% for FY15F.

- Maintain HOLD on CBIP with an unchanged fair value of RM2.33/share.

Source: AmeSecurities Research - 6 May 2015