CBIP’s SPV division (a 49%-owned subsidiary) received a letter of award to supply, deliver, test, and commission 17 units of airport fire vehicles for a total contract sum of RM76.2m. While we note this is the SPV division’s 1st contract win since 2017, contributions to bottomline will be insignificant and may not be sufficient to mitigate potential earnings drag from its recent acquisition of biofuel facilities. Maintain earnings forecasts, SOP-derived TP of RM1.00, and HOLD rating on the stock.

NEWSBREAK

CBIP announced that its SPV division (AVP Engineering (M) Sdn Bhd, a 49%-owned subsidiary) received a letter of award from Malaysia Airports to supply, deliver, test, and commission 17 units of airport fire vehicles over the next 4 years (while the maintenance of fire vehicles will be over the next 15 years) for a total contract sum of RM76.2m.

HLIB’s VIEW

1st contract win for SPV division in 2 years. We note this is the SPV division’s 1st contract win since 2017. Nevertheless, we believe contribution to bottomline will be insignificant. Based on our assumptions, the latest contract win will enhance CBIP’s bottomline by <2% p.a. over the next 4 years. Besides, we continue to hold the view that dry spell for contract flow at the division will likely remain for a while arising from ministerial position changes post GE14 results.

Forecast. Maintain for now, as we believe the latest contract win will not contribute meaningfully to CBIP’s bottomline, and this may not be sufficient to mitigate potential earnings drag from its recent acquisition of biofuel facilities.

Maintain HOLD, TP: RM1.00. We maintain our HOLD rating on CBIP, with an unchanged SOP-derived TP of RM1.00 (see Figure 1).

Source: Hong Leong Investment Bank Research - 24 Jun 2019