Results

• Within expectations? Reported 1Q17 core net profit of RM22.5m (qoq: -35.6%; yoy: +31.3%), accounting for 21.1-22.4% of our and consensus full-year forecasts.

Deviations

• We consider the results within expectations as we anticipate stronger quarters ahead. Historically, 1Q is seasonally weaker at ~20% of full-year earnings.

Dividend

• None.

Highlights

• QoQ? 1Q17 core net profit declined by 35.6% to RM22.5m due mainly to seasonally lower earnings contribution from both the mill engineering and SPV divisions.
• YoY? 1Q17 core net profit rose 31.3% to RM22.5m, mainly on the back of higher project billing at the SPV division, margin expansion at the mill engineering division, lower losses at upstream oil palm plantation division and better associate and JV contributions.
• Orderbook? Based on our estimates, orderbook at the palm oil mill engineering and SPV divisions stood at RM372m and RM405m as at 31 Mar 2017, which in turn translate to orderbook cover ratios of 0.9x and 2.6x 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 RM2.08, CBIP is trading at FY17-18 P/E of 12x and 10.4x respectively.

Valuation

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

Source: Hong Leong Investment Bank Research - 31 May 2017