Highlights

• CBIP secured a contract from PT. Lifere Agro Kapuas (a subsidiary of United Malacca Bhd) to construct a palm oil engineering mill (capacity of 45/90 mt/hour) in Kalimantan, Indonesia for a total sum of RM67m.
• The latest contract will contribute to CBIP’s FY17-18 top and bottom lines.
• The latest contract will boost CBIP’s orderbook at the oil mill engineering division (RM493m as at 30 Sep 2016) by 13.6% to RM560m (translating to 1.3x of the division’s turnover.

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 with management post results season.

Rating

BUY (↔)

• We continue to like CBIP for its strong earnings visibility (witnessed by the high order book for both its oil mill engineering and SPV divisions), healthy balance sheet (net cash per share of 23.7 sen as at 20 Sep 2016) and undemanding valuations. At RM2.15, the stock is trading at FY17-18 P/E of 9.8x and 9.7x respectively (excluding net cash per share of 23.7 sen as at 30 Sep 2016).

Valuation

• Maintain BUY rating on the stock, with unchanged SOP- derived TP of RM2.48.

Source: Hong Leong Investment Bank Research - 20 Feb 2017