Journey to Wealth
CB Industrial Holding - Secures RM44.7mil contract HOLD
- CB Industrial Product Holding Bhd (CBIP) has received aRM44.7mil contract to design and build a 30 tonne/hour-Modipalm palm oilmill.
- The contract also allows for an upgrade in the capacity ofthe mill by another 15 tonnes/hour during a two-year period.
- The contract was awarded by Kumpulan Perladangan PKINKBhd. PKINK is the abbreviation for Perbadanan Kemajuan Iktisad NegeriKelantan.
- According to the website, PKINK is a corporate bodyresponsible for leading the development and growth of the state of Kelantanaccording to principles of Islam.
- PKINK is involved in plantation, construction and propertyactivities, among others.
- We view the award positively as it would support CBIP'sprofitability by increasing its construction order book.
- Recall that there is risk that CBIP's net profit wouldfall in FY12F due to the disposal of the plantation assets.
- In our earnings forecast, we have assumed that thedisposal of the plantation assets would be completed by mid-FY12F.
- Plantation division (excluding associates and jointventure) accounted for 39% of CBIP's pre-tax profit in FY11.
- As at end-September 2011, CBIP's construction division hadRM817mil worth of contracts (excluding boiler contracts) and unbilled sales ofRM326mil.
- We maintain a HOLD on CBIP as valuations would become lessattractive upon the disposal of the plantation subsidiaries.
Source: AmeSecurities
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