We consider CB Industrial Product (CBIP)’s 9MFY13 core net profit to be  in  line  with  our  and  consensus’  estimates,  at  67-70%  of  the respective  FY13 forecasts.  We lift our FV to MYR3.83  (from MYR3.64), after incorporating CBIP’s latest net cash balance. Maintain BUY on this inexpensive proxy to the plantation sector, which is shielded from CPO price volatility .

• In  line.  We  consider  CB  Industrial  Product  (CBIP)’s  9MFY13  core  net profit to be in line with our  and consensus’  estimates,  accounting for  67-70% of the respective FY13 forecasts.
• Core  net  profit  down  21.2%  y-o-y.  9MFY13  core  net  profit  declined 21.2% y-o-y, despite revenue rising 9.3% y-o-y. Revenue rose mainly as a result of a  54.7% revenue surge  in the vehicle retrofitting division  due to its  project implementation and completion during the period. However, this was  offset by a 4.3% fall  in the oil mill engineering division  and the absence of revenue from the plantation division, which it disposed of in May  2012.  The  disposal  of  its  plantation  subsidiaries  also  affected CBIP’s  core  net  profit,  although  this  effect  was  mitigated  by  slightly higher  margins  of  24.1%  (vs  23.8%  in  9MFY12)  from  the  oil  mill engineering  segment  and  9.3%  (vs  7.6%  in  9MFY12)  from  the  vehicle retrofitting division.
• No changes  to forecasts. We maintain our forecasts. We expect 4Q13 to  be  the  strongest  quarter,  as  is  traditionally  the  case,  in  view  of  the timing of its progress billing to customers.
• Maintain  BUY.  We  lift  our  FV  to  MYR3.83  (from  MYR3.64),  after incorporating  CBIP’s  latest  net  cash  balance.  Maintain  BUY  on  this inexpensive proxy to the plantation sector, which is shielded from CPO price volatility. We believe CBIP’s new zero-discharge mill and its  recent proposed  acquisition  of  Vickers  Hoskins’  boiler  factory  will  extend  its market reach and bolster medium-term growth. Meanwhile, its plantation operations in Indonesia  –  which will start contributing more significantly from FY16/17 – should drive long-term growth.

Financial Exhibits

SWOT Analysis

•  CBIP has a pioneer tax status for its modipalm mill operations, which will expire in 2015. It is currently awaiting patent approval for its new technology – zero-discharge modipalm oil mill, which, if obtained, will result in a new pioneer tax status being granted, thus extending its tax-free status for another 10 years past 2015

Company Profile

CBIP manufactures and markets its patented palm oil mills and related products. It is also involved in retrofitting special vehicles and cultivation of palm oil plantations.

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Source: RHB