Highlights

• CBIP secured a contract from PT. Pratama Palm Abadi (a subsidiary of Oriental Holdings Bhd) to construct a palm oil engineering mill (capacity of 60/80 mt/hour) in Sumatera Selatan, Indonesia for a total sum of RM61.4m.
• The latest contract will contribute to CBIP’s FY18-19 top and bottom lines.
• The latest contract will boost CBIP’s orderbook at the oil mill engineering division (RM424m as at 30 Sep 2017) by circa14% to RM485m (translating to 1.4x 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, as we are already assuming CBIP’s oil mill engineering division to secure new job orders of RM400m (for FY18) in our earnings forecasts.

Rating

BUY (↔)

• We continue to like CBIP for its undemanding valuations (in particularly, following recent share price correction) and health balance sheet (net cash and net cash per share of RM82.8m and 15.5 sen as at 30 Sep 2017). At current share price of RM1.83, CBIP is trading FY17-18 P/E of 10.6x and 11x respectively

Valuation

• Maintain BUY rating on the stock, with unchanged SOP- derived TP of RM2.13 .

Source: Hong Leong Investment Bank Research - 05 Jan 2018