Results

• 1Q15 core net profit of RM17.2m (-56.1% qoq, -12.3% yoy) accounted for 16-17% of market and our full-year forecasts. Results are deemed to be within expectation as 1Q is a seasonally weaker quarter for CBIP and we are expecting better performance in coming quarters.

Deviations

• -

Dividend

• Declared a first single tier interim dividend of 3 sen/share.

Highlights

• 1Q16 net profit was down 56.1% qoq (-12.3% yoy) mainly due to 1) seasonally lower progress billing at the palm oil mill engineering division, 2) lower project billing for SPV division and 3) weaker contribution from associate and JV due to decrease in production during the current quarter.

• Strong support from POME division. We expect better contribution coming from this division with its strong order book of RM495m as at Mar-15. For FY16, our assumption for contract replenishment is RM450m. These will continue to drive the earnings growth in 2016 and 2017.

• Better contribution from SPV division going forward. SPV division has an orderbook of RM246m as at Mar 16, increase from RM35m as at Dec 15. This would be able to support the performance for this division for the next 18 months.

Risks

• Sharp increase in steel plate prices;
• Slowdown in demand for palm oil mills;
• Lower-than-expected FFB production and oil extraction rate at the JV and associate levels.
• Lower-than-expected dividend.

Forecasts

• No change in earnings forecast.

Rating

BUY

Positives

• (1) Proven track record; (2) Favourable demand outlook for palm oil mills; and (3) Strong balance sheet.

Negatives

• Share liquidity.

Valuation

• Maintain BUY with Target Price of RM2.35 based on SOP valuation.

Source: Hong Leong Investment Bank Research - 27 May 2016