CBIP announced that it has secured 2 contracts, with a total contract sum of RM131.7m. The contract wins will boost CBIP’s orderbook at the mill engineering division by circa 36% to RM499m, equivalent to an orderbook turnover of circa 1.3x at its mill engineering division. Maintain earnings forecasts, SOP-derived TP of RM1.18, and BUY rating. NEWSBREAK

CBIP announced that it has secured 2 contracts (with a total contract sum of RM131.7m), consisting: 1. A RM44.7m contract from PT Sanjung Makmur to design, manufacture, supply, install and commission of a unit of 45mt/hour continuous sterilisation palm oil mill; and 2. A RM87.0m contract from PT Kodeco Agrojaya Mandiri to design, fabricate, supply, deliver, construct, commission and maintain (i) a 60mt/hour conventional palm oil mill, (ii) a kernel crushing plant with daily processing capacity of 200 mt, and (iii) a 1,600-kilowatt biogas power generator plant.

HLIB’s VIEW

Latest contract wins will boost orderbook by 36%. The contract wins will boost CBIP’s orderbook at the mill engineering division by circa 36% to RM499m, equivalent to an orderbook turnover of circa 1.3x at its mill engineering division.

Positive but not unexpected. While the latest contracts wins are positive for CBIP’s earnings prospects, we note that has already been reflected in our forecasts. In our earnings forecasts, we are projecting CBIP’s mill engineering division to secure RM150m worth of contracts in FY19, with an EBIT margin assumption of 25%. As highlighted in our report earlier, while the oil mill engineering division is able to replenish its orderbook (as there is still demand for palm oil mills in Indonesia), we expect dry spell for contract flow at the SPV division arising from ministerial position changes (post GE14 results), which will likely result in delay in new contract awards.

Forecast. Maintain.

Maintain BUY, TP: RM1.18. We maintain our BUY rating on CBIP, with an unchanged SOP-derived TP of RM1.18 (see Figure 1).

Source: Hong Leong Investment Bank Research - 14 Feb 2019