CBIP’s 1Q19 core net profit of RM11m (>100% QoQ, -37.2% YoY) came in within our expectation, accounting for 26% of our full-year estimate. Orderbook at for oil mill engineering division increased to RM445m as at 31 Mar 2019 (from RM335m as at 31 Dec 2019), thanks to RM214.3m worth of new contracts secured YTD. While we expect dry spell at SPV division to remain (since end FY18), we expect loss contribution at this division to be minimal. We maintain our core net profit forecasts, SOP-derived TP of RM1.01 as well as HOLD rating on the back. We see limited upside to CBIP’s share price performance, on the back of its less-than-positive earnings growth prospects.

Within expectation. 1Q19 core net profit of RM11m (>100% QoQ, -37.2% YoY) came in within our expectation, accounting for 26% of our full-year estimate.

QoQ. Although revenue was lower by 20.6%, 1Q19 returned to the black with a core net profit of RM11m (vs. a core net loss of RM0.5m in previous quarter), mainly on the back of the absence of impairment losses and improved earnings contribution from oil mill engineering segment, which altogether more than mitigated losses at upstream plantation and SPV segments, as well as negative contributions from associates and JVs.

YoY. 1Q19 core net profit declined by 37.2% to RM11m (from RM17.6m a year ago) mainly on the back of losses incurred by SPV division (arising from lower project billing) and losses at upstream plantation and SPV segments, as well as negative contributions from associates and JVs, but partly mitigated by improved earnings at oil mill engineering segment (arising from higher project billing and higher project margin).

Orderbook. Orderbook at for oil mill engineering division increased to RM445m as at 31 Mar 2019 (from RM335m as at 31 Dec 2019), thanks to RM214.3m worth of new contracts secured YTD. While we expect dry spell at SPV division to remain (since end-FY18), we expect loss contribution at this division to be minimal.

Forecast. Maintain.

Maintain HOLD, TP: RM1.01. We maintain our HOLD rating on CBIP, with an unchanged SOP-derived TP of RM1.01 (see Figure 2). We continue to see limited upside to CBIP’s share price performance, on the back of its less-than-positive earnings growth prospects arising from dry spell at SPV division, dismal palm oil prices, and potential drag from recent investments into biodiesel assets.

Source: Hong Leong Investment Bank Research - 3 Jun 2019