Journey to Wealth

CB Industrial - Another set of dividends BUY

kiasutrader
Publish date: Fri, 02 Nov 2012, 10:16 AM

- Maintain a BUY on CB Industrial Product Holding Bhd (CBIP) with an unchanged fair value of RM3.00/share. Our fair value is based on an FY13F PE of 10x. 

- The group's PE band ranged from a low of 3x to a high of 21x in the past seven years. Average PE was 10x. 

- CBIP's 9MFY12 results were slightly above consensus estimates but in line with our expectations. The group has declared a second interim dividend of 5 sen/share, which brings total gross dividends to 15 sen/share for 9MFY12.

- To be conservative, we have forecast a gross DPS of 15 sen for FY12F, which implies that CBIP would not be paying anymore dividends for 4QFY12. The gross DPS of 15 sen for FY12F suggests a yield of 5.5%.

- CBIP's turnover surged 62% YoY to RM373.6mil in 9MFY12, underpinned by an increase in the construction order book and pre-tax margin of the mill construction division. 

- CBIP secured 18 construction contracts in FY11 with a value of RM313.2mil. In comparison, the group won 14 contracts in FY10 with a total value of RM178.6mil. CBIP takes about 12-18 months to complete each construction contract.  

- As a result, turnover of the mill construction division climbed 25.3% YoY to RM250.9mil in 9MFY12 while pre-tax profit surged 113.6% YoY to RM59.7mil. Pre-tax profit margin of the division improved from 14% in 9MFY11  to 24% in 9MFY12.

- As at end-June 2012, the unbilled sales of CBIP's mill construction division stood at RM379.5mil. 

- CBIP yesterday proposed to acquire 16,611ha of land in Central Kalimantan for RM7.4mil. The land consists  of 14,770ha of convertible production forest and 1,841ha of 'other purpose area' which can be used to plant oil palm.

- The proposed acquisition would bring the group's total plantation landbank to 53,884ha.  

- Most of the group's plantation landbank in Kalimantan are unplanted. CBIP is expected to commence plantings in FY13F. New plantings are envisaged to be 5,000ha to 8,000ha per year.   

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