Core net profit of RM56.7m (+98.6%) came in within our expectation, accounting for 74.6% of our full-year estimate. Again the consensus, the results came in above, accounting for 81.3% of full-year estimate. We raise our FY21-23 core net profit forecasts by 3.9%/14.1%/6.1%, mainly to account for higher CPO price, but partially offset by higher production cost assumptions, as well as new contract secured at SPV segment (which is expected to contribute to CBIP’s bottomline in FY22-23). We maintain our HOLD rating on CBIP, with a higher sum-of-parts TP of RM1.30 (from RM1.27 earlier), to reflect the upward revision in our core net profit forecasts and latest net debt position.

Within our expectation but above consensus. 3Q21 core net profit of RM19.7m (+2.3%; YoY: +36.2%) took 9M21 sum to RM56.7m (+98.6%), which came in within our expectation, accounting for 74.6% of our full-year estimate. Again the consensus, the results came in above, accounting for 81.3% of full-year estimate.

Exceptional items (EIs) in 9M21. Core net profit of RM56.7m in 9M21 was arrived after adjusting for (i) RM10.7m impairment at upstream plantation segment, (ii) RM0.5m gain on disposal, (iii) RM0.3m bad debts recovered, (iv) RM0.3m fair value gain on biological assets, and (v) RM3.2m gain on derivative and forex.

Dividend. Declared 2nd interim DPS of 2 sen (entitlement and payment dates to be announced in due course), bringing YTD DPS to 4 sen.

QoQ. Core net profit rose marginally (by 2.3%) to RM19.7m in 3Q21, as turnaround at upstream plantation segment (as a result of higher realised palm product prices) and improved performance at oil mill engineering segment were moderated by weaker performance at refinery segment.

YoY. Core net profit rose by 36.2% to RM19.7m, this was mainly attributable to turnaround at upstream plantation (thanks to higher realised palm product prices), SPV and refinery segments, but partly mitigated by lower contribution from oil mill engineering segment (as the implementation of movement restrictions affected the segment’s project billing).

YTD. 9M21 core net profit surged 98.6% to RM56.7m, due to same reasons mentioned above.

Orderbook. Orderbook at oil mill engineering segment declined marginally to RM336m as at 30 Sep 2021 (from RM345m as at 30 Jun 2021). Orderbook at SPV segment, on the other hand, swell to RM138m as at 30 Sep 2021 (from RM70m as at 30 Jun 2021), due to new contract secured (amounted to ~RM77m, which will be recognised over the next 2 years).

Forecast. We raise our FY21-23 core net profit forecasts by 3.9%/14.1%/6.1%, mainly to account for higher CPO price, but partially offset by higher production cost assumptions (in line with the recent upward revision in our sector-wide CPO price assumptions), as well as new contract secured at SPV segment (which is expected to contribute to CBIP’s bottomline in FY22-23).

Maintain HOLD with higher TP of RM1.30. Maintain HOLD rating on CBIP, with a higher sum-of-parts TP of RM1.30 (from RM1.27 earlier), to reflect the upward revision in our core net profit forecasts and CBIP’s latest net debt position. At RM1.30, CBIP is trading at FY21-23 P/E of 8.9x, 10.3x and 11.2x, respectively. Re-rating catalysts to the stock include (i) disposal of non-core assets, and/or (ii) project replenishment picks up momentum further.

Source: Hong Leong Investment Bank Research - 26 Nov 2021