Core net profit of RM89.8m (+40.4%) beat expectations, exceeding consensus and our estimated by 13.1-13.8%, due mainly to better-than-expected margins at oil mill engineering and SPV segments, and realised palm product prices. We raise our FY22-23 core net profit forecasts by 41.9-44.0%, largely to reflect higher EBIT margin assumption at oil mill engineering segment and higher palm product price assumptions. We maintain our HOLD rating on CBIP with higher sum-of parts TP on CBIP to RM1.43 from RM1.30 earlier, to reflect the upward revision in our core net profit forecasts and CBIP’s latest net debt position.

Beat expectations. 4Q21 core net profit of RM33.1m (QoQ: +68.2%; YoY: -6.5%) took FY21 sum to RM89.8m (+40.4%). The results beat expectations, exceeding consensus and our estimated by 13.1-13.8%, due mainly to better-than-expected margins at oil mill engineering and SPV segments, and realised palm product prices.

Exceptional items (EIs) in FY21. Core net profit of RM89.8m in FY21 was arrived after adjusting for (i) RM0.3m bad debts recovered, (ii) RM11.6m impairment losses, (iii) RM0.7m disposal gain, (iv) RM2.5m fair value gain on biological assets, and (v) RM4.0m gain on forex.

QoQ. Core net profit surged by 68.2% to RM33.1m in 4Q21, boosted mainly by improved performance at oil mill engineering, SPV and upstream plantation segments.

YoY. Core net profit declined by 6.5% to RM33.1m in 4Q21, as improved performance at key segments (including upstream plantation, oil mill engineering and SPV segments) were more than offset by lower contribution from JV and associate earnings and higher tax expense.

YTD. Core net profit surged by 40.4% to RM89.8m in FY21, boosted by improved performance at all key segments.

Orderbook. Orderbook at oil mill engineering segment increased marginally to RM341m as at 31 Dec 2021 (from RM336m as at 30 Sep 2021), due to secure of new contract (worth circa RM85m) during 4Q21. Orderbook at SPV segment, on the other hand, declined to RM125m as at 31 Dec 2021 (from RM138m as at 30 Sep 2021).

Forecast. We raise our FY22-23 core net profit forecasts by 41.9-44.0%, largely to reflect higher EBIT margin assumption at oil mill engineering segment and higher palm product price assumptions.

Maintain HOLD with higher TP of RM1.43. We maintain our HOLD rating on CBIP with higher sum-of-parts TP on CBIP to RM1.43 (see Figure #2) from RM1.30 earlier, to reflect the upward revision in our core net profit forecasts and CBIP’s latest net debt position. At RM1.35, CBIP is trading at FY22-23 P/E of 7.6x and 8.1x. Re-rating catalysts to the stock include (i) disposal of non-core assets materialise, and/or (ii) project replenishment picks up momentum further.

Source: Hong Leong Investment Bank Research - 25 Feb 2022