CBIP’s 1H18 core net profit of RM39.7m (-16.3%) came in within expectations, accounting for 51.5-53.3% consensus and our full-year forecasts. We maintain our FY18-20 core net profit forecasts, SOP-derived TP of RM1.55 and BUY rating on the stock. At current share price of RM1.37, the market is pricing CBIP’s effective planted plantation land bank (18,605 ha) at only RM8,930/ha, assuming (i) engineering division is valued at 8x FY19 earnings, (ii) current net cash of RM69.6m, and (iii) zero value for its 20,000 ha of unplanted land bank.

Within expectations. 2Q18 core net profit of RM22.1m (QoQ: +25.7%; YoY: -11.3%) took 1HFY18 core net profit to RM39.7m (-16.3%). The results came in within expectations, accounting for 51.5-53.3% of consensus and our full-year forecasts.

QoQ. 2Q18 core net profit increased by 25.7% to RM22.1m, as higher losses at upstream plantation segment and lower earnings contribution from oil mill engineering segment were more than mitigated by higher profit recognised at the SPV division (arising from higher project implementation and completion).

YoY. Although revenue was 9.3% higher, 2Q18 core net profit declined by 11.3% to RM22.1m, as higher losses at upstream plantation segment and lower earnings contribution from mill engineering segment were more than mitigated by higher profit recognised at the SPV division (arising from higher project implementation and completion).

YTD. 1H18 core net profit declined by 16.3% to RM39.7m as higher earnings contribution from SPV division (as a result of higher project implementation and completion) was more than offset by weaker oil mill engineering division (arising from lower project billings and higher operating costs).

Orderbook. As at 30 Jun 2018, CBIP had orderbook of RM343m and RM15m at the oil mill engineering and SPV divisions, translating to orderbook cover of 1x and 0.05x respectively.

Forecast. Maintained.

Maintain BUY; TP: RM1.55. We maintain our BUY rating on the stock, with unchanged SOP-derived TP of RM1.55. We believe the weak earnings prospects have been more than priced in by the market. At current share price of RM1.37, the market is pricing CBIP’s effective planted plantation land bank (18,605 ha) at only RM8,930/ha, assuming (i) engineering division is valued at 8x FY19 earnings, (ii) current net cash of RM69.6m, and (iii) zero value for its 20,000 ha of unplanted land bank.

Source: Hong Leong Investment Bank Research - 24 Aug 2018