MARKET DEVELOPMENT
CB Industrial Products Wins RM50.3Mil Contract, HLIB Research Maintains Buy
CB Industrial Products Wins RM50.3Mil Contract, HLIB Research Maintains Buy
13/09/2013 (The Star) - HongLeong Investment Bank Research today reaffirmed its Buy call on palm oil specialist CB Industrial Product Holdings Bhd following the company’s success in securing a job in Indonesia worth RM50.3mil.
The contract from PT Rafi Kamajaya Abadi in West Kalimantan is to build a 60-tonne/hour palm oil mill and deliver three units of double-decked continuous sterilisation system.
The target price is maintained at RM3.39 for the stock which closed yesterday at RM2.27.
HLIB Research says it is not revising its earnings forecast as “we have already assumed CB Industrial Product will obtain RM300mil’s worth of contracts for 2013.”
“Based on our estimates, unbilled sales for the palm oil mill engineering unit are likely to have increased to about RM350mil,” it adds, saying it thinks the company is on track to secure more contracts,” the research house says.
Possible risks to the company include 1) sharp increase in steel plate prices, which may in turn affect its engineering division’s profitability, 2) a slowdown in demand for palm oil mills, 3) lower-than-expected FFB production and oil extraction rate at the JV and associate levels, and 4) foreign currency exposure.
“SOP-derived TP is maintained at RM3.39. We continue to like CBIP for the bright demand prospects for CPO oil mill; undemanding valuation (current share price of RM2.77 implies 2013 price-earnings ratio of only 8.1 times; and decent dividend yield of more than 5%.
"In our forecast, we are projecting a total DPS of 15 sen/year."
The contract from PT Rafi Kamajaya Abadi in West Kalimantan is to build a 60-tonne/hour palm oil mill and deliver three units of double-decked continuous sterilisation system.
The target price is maintained at RM3.39 for the stock which closed yesterday at RM2.27.
HLIB Research says it is not revising its earnings forecast as “we have already assumed CB Industrial Product will obtain RM300mil’s worth of contracts for 2013.”
“Based on our estimates, unbilled sales for the palm oil mill engineering unit are likely to have increased to about RM350mil,” it adds, saying it thinks the company is on track to secure more contracts,” the research house says.
Possible risks to the company include 1) sharp increase in steel plate prices, which may in turn affect its engineering division’s profitability, 2) a slowdown in demand for palm oil mills, 3) lower-than-expected FFB production and oil extraction rate at the JV and associate levels, and 4) foreign currency exposure.
“SOP-derived TP is maintained at RM3.39. We continue to like CBIP for the bright demand prospects for CPO oil mill; undemanding valuation (current share price of RM2.77 implies 2013 price-earnings ratio of only 8.1 times; and decent dividend yield of more than 5%.
"In our forecast, we are projecting a total DPS of 15 sen/year."