CBIP’s 1QFY13 net profit was in line with our and consensus FY13 estimates, comprising 20-22% of FY3 forecasts. We consider this to be in line as the 1Q of the year is typically the weakest quarter of the year. Maintain Buy on CBIP with an unchanged fair value of MYR3.20. We continue to see CBIP as an inexpensive proxy to the plantation sector, which is shielded from CPO price volatilities.  

-  In line. CBIP’s 1QFY13 core net profit was in line with our and consensus FY13 estimates, comprising 20-22% of forecasts. We consider this to be in line as 1Q is typically the weakest quarter for CBIP, based on historical trends, given the timing of its progress bills to its customers.    

- Core net profit fell 24.7% yoy, as revenue rose 11.6% yoy in 1QFY13. The increase in revenue was attributed mainly to a 113.5% increase in the vehicle retrofitting division (due to project implementation and completion during the period), offset by a 6.8% yoy decline coming from the oil mill engineering division (due to timing of progress billing) and the absence of revenue from the plantation division which was disposed of in May 2012.  The decline in core net profit, however, was due to the absence of contributions from the plantations division, offset by higher margins recorded in the oil mill engineering division of 25.4% (from 22.8% in 1QFY12).

- Forecasts tweaked. We have revised our forecasts downwards by 2.4-4.6% for FY13-15, after taking into account our recent sector-wide downgrade in CPO price assumptions, which would affect its associate contributions. We now assume CPO prices of MYR2,292/tonne for FY13 (from MYR2,632) and MYR2,457/tonne for FY14 and FY15 (from MYR2,805). Note that our CPO price assumptions have imputed a discount based on the export tax rate applicable at these prices.  

-  Maintain Buy. Post-earnings revision, after rolling forward our SOP-based valuations to CY14 and updating for CBIP’s latest net cash balance, our fair value is relatively unchanged at MYR3.20. Maintain Buy on CBIP as an inexpensive proxy to the plantation sector, which is shielded from CPO price volatilities.

Source: RHB