22/08/2012 (Borneo Post) - CB Industrial Product Holding Bhd’s (CBIP) results for the first half of financial year 2012 ending December (1HFY12) have come within consensus estimates, making up 57 to 60 per cent of FY12 forecasts.

The profit before tax of RM196.6 million was generated from a turnover of RM284.5 million which saw an increase coming mainly from a 22 per cent increase in the group’s oil mill engineering division and more than 100 per cent increase in the vehicle retrofitting division.

This boost in turn was offset by a 66 per cent year-on-year (y-o-y) decline in the plantation division, as the sale of the plantation subsidiaries, amounting to RM139.6 million was completed in May.

RHB Research Institute Sdn Bhd (RHB Research) stated that earnings from the plantation division was still included in CBIP’s profits in 1Q12 and as such the group “recorded an EI (exceptional items) gain of RM139.6 million in the second quarter (2Q) of FY12, coming from the sale.

“The relatively smaller rise in core net profit came from lower margins in the plantation division of 40.6 per cent (from 44.6 per cent in 1HFY11), offset by higher margins recorded in oil mill engineering division of 24.4 per cent (from 13.7 per cent in 1H11).

“CBIP declared an interim tax-exempt dividend of 10 sen per share, in line with our projections of 15 sen for FY12, the research house said.

Contributions from plantation associates (Bahtera Bahagia, Kumpulan Kris Jati and Solar Green) declined by some 70 per cent y-o-y, as fresh fruit bunch production and crude palm oil prices fell, it added.

As such, the research house stated, “We expect the next few quarters to show weaker profits due to the completion of the sale of the plantation subsidiaries in May.

RHB Research noted the main risks to the forecast: a significant decline in oil mill engineering contracts due to slower-than-expected economic recovery and plantation investment in Indonesia as well as Malaysia, a stronger-than-expected rise in steel prices and weakening of the US dollar, resulting in weaker-than-expected margins for the oil mill engineering division.

In addition, a fall in crude palm oil (CPO) and other global vegetable oil prices caused by weather abnormalities and a reversal in crude oil prices (and thus CPO prices) were notable risks.

After updating for CBIP’s latest net cash balance at RM193.2 million, the research house reduced its fair value of the stock from RM3.30 per share to RM3.15 per share, based on unchanged PE targets of nine times for the oil mill engineering division and seven times for the plantation division.