Results

• 4Q16 core net profit of RM34.9m (qoq: +64.5%; yoy: - 10.7%) took FY16 core net profit to RM93.2m (-10.8%). The results came in slightly below our expectation (accounting for 93.4% of our forecast), but within street estimates (accounting for 104.8% consensus estimates).

Deviations

• Slower-than-expected project billing at the palm oil mill engineering division.

Dividend

• None.

Highlights

• QoQ… 4Q16 core net profit rose 64.5% to RM34.9m, driven mainly by higher earnings contribution from SPV division (which in turn was driven by higher project billing) and margin expansion at the palm oil mill engineering division (which more than offset lower project billing).
• FY16… Although revenue increasing by 5.3% to RM570.1m, core net profit declined by 10.8% to RM93.2m, as higher project billings at the SPV division and contributions from JV and associates were offset by weaker earnings at the palm oil mill engineering division (due mainly to lower project billing) and weaker margin at the SPV division arising from higher operating expenses.
• Despite the slight disappointment in results (vis-à-vis our projected earnings), we remain positive on CBIP’s earnings outlook, underpinned by high orderbook at both the palm oil mill engineering and SPV divisions. Based on our estimates, orderbook at the palm oil mill engineering and SPV divisions stood at RM417m and RM449m respectively, which in turn translate to orderbook cover ratios of 1x and 2.8x respectively.

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), healthy balance sheet and undemanding valuation. At RM2.15, CBIP is trading at FY17-18 P/E of 10.9x and 10.7x respectively.

Valuation

• Maintain BUY with unchanged SOP-derived TP of RM2.48 .

Source: Hong Leong Investment Bank Research - 23 Feb 2017