CBIP’s core net profit of RM37.0m in 1H21 (+162.7%) beat expectations, accounting for 58-59.2% of consensus and our full-year estimates, due mainly to better-than-expected performance at refinery segment. We raise our FY21-23 core net profit forecasts by 11.2%, 9.3% and 9.3%, mainly to reflect higher earnings assumption at refinery segment. We maintain our HOLD rating on CBIP, with a higher sum-of-parts TP of RM1.27 (from RM1.20 earlier), to reflect the upward revision in our core net profit forecasts. Despite the positive surprise in results, we believe the improved financial performance has already been reflected in its share price. In our view, share price rerating would only be warranted should (i) disposal of non-core assets materialise, and/or (ii) project replenishment picks up momentum further.

Beat expectations. 2Q21 core net profit of RM19.3m (QoQ: +8.6%, YoY: +10.0%) took 1H21’s sum to RM37.0m (+162.7%). The results beat expectations, accounting for 58- 59.2% of consensus and our full-year estimates, due mainly to better-than-expected performance at refinery segment.

Exceptional items in 1H21. Core net profit of RM32.0m in 1H21 was arrived after adjusting for (i) RM0.1m fair value gain on biological assets, (ii) RM0.6m disposal gain, (iii) RM0.2m bad debts recovered, (iv) 0.5m gain on derivatives, (v) RM0.6m forex gain (vi) RM5m impairment at upstream plantation segment.

Dividend. Proposed interim DPS of 2 sen, which entitlement and payment dates will be announced on a later date.

QoQ. Core net profit rose 8.6% to RM19.3m in 2Q21, helped by better palm product prices, improved performance at refinery segment, and turnaround at SPV segment. All these more than mitigated lower project billing at oil mill engineering segment (as a result of restrictions from MCO/ Phase 1).

YoY. Core net profit surged more than 10x to RM19.3m in 2Q21 (from RM1.7m SPLY), boosted mainly by sharply higher palm product prices and turnaround at refinery segment, but partly moderated by lower project billing at oil mill engineering segment.

YTD. Core net profit more than doubled to RM37.0m in 1H21 (from RM14.1m SPLY) due to same reasons mentioned above.

Orderbook. Orderbook at oil mill engineering segment trended up to RM345m as at 30 Jun 2021 (from RM289m as at 31 Mar 2021), as the group secured 4 new contracts in Indonesia during 2Q21. Orderbook at SPV segment remained unchanged at RM70m as at 30 Jun 2021.

Forecast. We raise our FY21-23 core net profit forecasts by 11.2%, 9.3% and 9.3%, mainly to reflect higher earnings assumption at refinery segment.

Maintain HOLD with higher TP of RM1.27. We maintain our HOLD rating on CBIP, with a higher sum-of-parts TP of RM1.27 (from RM1.20 earlier), to reflect the upward revision in our core net profit forecasts. Despite the positive surprise in results, we believe the improved financial performance has already been reflected in its share price. At RM1.35, CBIP is trading at FY21-22 P/E of 12.9 and 10.9x. In our view, share price rerating would only be warranted should (i) disposal of non-core assets materialise, and/or (ii) project replenishment picks up momentum further.

Source: Hong Leong Investment Bank Research - 27 Aug 2021