Results

• 2Q17 core net profit of RM24.9m (qoq: +10.8%; yoy: +24.1%) took 1H17 core net profit to RM47.4m (+27.4%), accounting for 44.6-47.1% of our and consensus full-year forecasts.

Deviations

• Broadly in line. We consider the results within expectations as 2H is usually stronger on the back of higher project billing from SPV segment.

Dividend

• None.

Highlights

• QoQ… 2Q17 core net profit rose 10.8% to RM24.9m, driven by significantly higher earnings contribution from SPV division, which more than offset lower earnings contributions from: (1) mill engineering division; and (2) associate and JV.

• YoY… 2Q17 core net profit rose 24.1% to RM24.9m, as lower earnings contribution from oil mill engineering division was more than mitigated by higher SPV earnings (thanks to the large contract secured in previous year, which has in turn resulted in higher project implementation and completion) and higher palm product prices (which has in turn boosted JV and associate earnings).

• YTD… 1H17 core net profit rose 27.4% to RM47.4m, boosted mainly by higher earnings contribution from SPV division, JV and associate, as well as narrowed losses at upstream plantation operation.

• Orderbook… Based on our estimates, orderbook at the palm oil mill engineering and SPV divisions stood at RM374m and RM355m as at 30 Jun 2017, translating to orderbook cover ratios of 0.9x and 2.2x 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.

Rating

BUY ( ↔ )

• We continue to like CBIP for strong earnings visibility (witnessed by its decent orderbook), healthy balance sheet and undemanding valuation. At current price of RM1.98, CBIP is trading at FY17-18 P/E of 11.4x and 9.9x respectively.

Valuation

• Maintain BUY with unchanged SOP-derived TP of RM2.48 (see Figure 4).

Source: Hong Leong Investment Bank Research - 24 Aug 2017