CB Industrial Product (CBIP) has secured a contract from PT Nabire Baru to set up a 45MT/hour continuous sterilisation palm oil mill with a combined value of RM48.6m, bringing YTD palm oil milling equipment (POME) order-book replenishment to RM301.4m, making up 79% of our FY19E replenishment assumption of RM380m. No changes to FY19-20E earnings as replenishments are within expectation. BUY with a TP of RM1.25 based on Fwd. PER of 11.3x.

CBIP announced that its wholly-owned PalmitEco Engineering and its 95%-owned PT CB Polaindo had secured a contract from PT Nabire Baru on 24 April 2019. The contract entailed setting up a 45MT/hour continuous sterilisation palm oil mill with a combined value of RM48.6m and is expected to be completed by 30 April 2020 (12 months).

The contract resulted in an aggregate YTD order-book replenishment value of RM301.4m which is on-track with our expectation, making up 79% of our full-year assumption of RM380m for FY19. The new contract win should lift CBIP’s outstanding order-book for palm oil milling equipment (POME) segment to c.RM504.4m (from RM455.8m). Assuming PBT margin of 15%, this translates into a PBT of RM7.3m.

Looking ahead, we expect CBIP to clinch 1-2 more contracts by year-end, compensating for its exhausted SPV order-book and subdued plantation business.

Source: Rakuten Research - 30 Apr 2019