Results

• 3Q16 core net profit of RM28.6m (qoq: +57.2%; yoy: +61.1%) took 9M16 core net profit to RM58.3m (+1.6%), accounting for 66.1% and 58.5% of consensus and our full-year forecasts. We consider the results within expectations, as 4Q is seasonally stronger on the back of lumpy earnings recognition at the SPV segment.

Deviations

• Broadly in line.

Dividend

• Proposed interim DPS of 3 sen. For the full-year, we are projecting a total DPS of 6 sen (translating to dividend yield of 3.1%).

Highlights

• QoQ… 3Q16 core net profit rose 57.2% to RM28.6m, as all divisions recorded higher earnings (margin expansion at palm oil mill engineering division, while the SPV division recorded higher project billing and margin improvement from commencement and implementation of new projects), stronger JV and associate contributions (thanks to FFB output recovery and higher palm product prices).

• YTD… Despite revenue rising by 9.6% to RM391.7m, core net profit rose by only 1.6% RM58.3m, as higher project billings (at both the palm oil mill engineering and SPV divisions), margin expansion at the SPV division (from commencement and implementation of new projects), and higher palm product prices were partly offset by higher operating expenses at the palm oil mill engineering division.

• Moving into 4Q16, we expect CBIP’s earnings to come in stronger, underpinned by high orderbook for both the oil mill engineering and SPV divisions. Besides, we note that CBIP’s financial standing remains strong, evidenced by net cash of RM124.4m or 24 sen/share at end 3Q16.

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

• Maintained, pending further update from management post results season.

Rating

BUY ( ↔ )

• We continue to like CBIP for strong earnings visibility (witnessed by its high orderbook) and healthy balance sheet.

Valuation

• Maintain BUY with higher SOP-derived TP of RM2.42 (from RM2.41 previously) as we update CBIP’s latest net cash position.

Source: Hong Leong Investment Bank Research - 23 Nov 2016