HwangDBS cuts CBIP earnings forecast, TP on weak performance

HwangDBS cuts CBIP earnings forecast, TP on weak performance
Business & Markets 2013
Written by Shalini Kumar of theedgemalaysia.com
Tuesday, 20 August 2013 11:29

KUALA LUMPUR (August 20): HwangDBS Vickers Research has cut its earnings forecast for CB INDUSTRIAL PRODUCT HOLDING [] Bhd (CBIP), and target price for shares of the palm oil mill builder.

This folows CBIP's weak performance in the second quarter ended June 30, 2013 (2QFY13).

In a note today, HwangDBS said it has cut its earnings forecast by 5% to 13% for CBIP between financial years ending December 31, 2013 and 2015.

This comes with a revised target price of RM3.10 from RM3.20 previously for the stock.

HwangDBS had however kept its "buy" rating for CBIP. Yesterday, CBIP said 2QFY13 net profit fell 20% year-on-year to RM18.9 million as revenue declined 4% to RM145.4 million.

According to HwangDBS, CBIP's results had come in "below expectations".

"2Q13 earnings were mainly dragged by lower contributions from the special purpose vehicle segment and losses from its palm oil operations (resulting from lower CPO). This brings 1HFY13 net profit to RM37.5 million, which is below expectations.

"Positively, the group registered impressive profits from its core engineering and contracting (E&C) segment. Despite the weakness from the palm oil operations, we are encouraged by contributions from its core E&C division," HwangDBS said.

According to HwangDBS, CBIP is expanding its capacity to 20 to 24 mills a year by end-2013 via its factory in Klang. This compares to the current capacity of 12 to 14 mills.

"We believe there is upside to engineering margins resulting from increasing focus on mechanical projects that yield higher margins and outsourcing of lower-margin civil works of the mill," said HwangDBS.