Period  3Q13/ 9M13

Actual vs. Expectations CB Industrial Product (CBIP)’s 9M13 core net profit of RM62m is broadly in line as it makes up 70% of consensus forecast (RM88m) and 72% of our forecast (RM86m).

Dividends  As expected, a second interim single tier dividend of 5.0 sen was announced.

Key Results Highlights YoY, 9M13 core net profit declined 11% due to lower contribution from the associates and jointly controlled entity (A&JCE). We believe the low CPO prices have affected A&JCE earnings.

 QoQ, 3Q13 core net profit improved 22% to RM23m due to better performance from its special purpose vehicles (SPV) division and the turnaround in A&JCE from a position of losses in 2Q13.

Outlook  We expect 4Q13 results to be good due to support from the implementation of the projects secured in hand from both Palm Oil Mill Equipment (POM) division and SPV division.

Change to Forecasts We maintain both our core earnings for FY13E (RM86m) and FY14E (RM95m).

Rating Maintain OUTPERFORM

We continue to like CBIP for the following reasons: (i) it is poised to capture strong demand for palm oil mills in 2014, (ii) steady margin improvement historically, (iii) decent dividend of 3.7%, and (iv) strong balance sheet with net cash of RM133m.

Valuation  We maintain our TP of RM3.18 based on an unchanged Fwd. PER of 9.0x on CY14E EPS of 35.3 sen.

Risks to Our Call Lower than expected margin for POM division.

 Lower than expected CPO prices.

Source: Kenanga