FY22 core net profit of RM35.5m (-60.4%) met our expectation, accounting for 105% of our estimate. Maintain earnings forecasts, TP of RM0.94 (based on unchanged 7x FY24 core EPS of 13.4 sen) and SELL rating on CBIP. Earnings prospects for CBIP remain unexciting, on the back of limited planted oil palm plantation landbank growth potential (which in turn translates to unexciting demand growth potential for CBIP’s engineering segment), and its high operating leverage at upstream plantation segment.

Within our expectation. 4Q22 core net profit of RM15.5m (vs. core net loss of - RM23.8m in 3Q22 and core net profit of RM33.1m in 4Q21) took FY22 total sum to RM35.5m (-60.4%). The results met our expectation, accounting for 105% of our estimate. Core net profit of RM35.5m in FY22 was arrived after adjusting for (i) RM4.1m bad debts recovered, (ii) RM0.6m fair valus gain on biological assets, (iii) RM21.2m impairment loss at SPV segment, (iv) RM0.3m disposal gain , (v) RM16.8m loss on derivative, and (vi) RM8.4m forex loss.

QoQ. 4Q22 performance returned to the black, with a core net profit of RM15.5m (vs. a core net loss of -RM23.8m in 3Q22), due to lower losses at downstream segment and improved profitability at engineering segment, which more than mitigated widened losses at upstream plantation segment (on the back of lower FFB prices, we believe).

YoY. 4Q22 core net profit fell by -53.1% to RM15.5m, dragged mainly by (i) weaker earnings at engineering segment, (ii) weaker palm product prices (which has in turn resulted in losses at upstream plantation segment) and lower contribution from associates and JVs, and (iii) losses at downstream segment.

YTD. FY22 core net profit declined by -60.4% to RM35.5m, dragged mainly by impairment loss on receivables at engineering segment, (ii) higher production cost and production disruption at upstream plantation segment, (iii) lower contribution from associates and JVs, (iv) losses at downstream segment.

Orderbook. Orderbook at engineering segment declined further to RM261m as at 31 Dec 2022 (vs. RM299m as at 30 Sep 2022), while orderbook at SPV segment was bumped up to RM339m as at 31 Dec 2022 (from RM95m as at 30 Sep 2022).

Forecast. Maintain.

Maintain SELL, with unchanged TP of RM0.94. We maintain our SELL rating on CBIP, with an unchanged TP of RM0.94 based on unchanged 7x FY24 core EPS of 13.4 sen. Earnings prospects for CBIP remain unexciting, on the back of limited planted oil palm plantation landbank growth potential (which in turn translates to unexciting demand growth potential for CBIP’s engineering segment), and its high operating leverage at upstream plantation segment.

Source: Hong Leong Investment Bank Research - 1 Mar 2023