Hot Stock CBIP rises 3.3% on RM46m PNG palm oil mill job

by **Cals** Tue 18 Mar 2014, 14:32

Hot Stock CBIP rises 3.3% on RM46m PNG palm oil mill job

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Tuesday, 18 March 2014 14:09

KUALA LUMPUR (Mar 18): CB Industrial Product Holding Bhd (CBIP) rose as much as 3.3% after the firm said it won a RM46 million job to build a palm oil mill in Papua New Guinea.

Yesterday, CBIP announced in a statement to Bursa Malaysia that it received the contract from Gilford Ltd, a unit of Rimbunan Hijau (PNG) Group.

Today CBIP rose 13 sen or 3% to RM4.42 at 12.30pm. The tenth-largest gainer saw a trade volume of 442,800 shares/ It earlier rose 14 sen to hit a high of RM4.43.

Analysts are optimistic on CBIP's outlook. In a note today, Kenanga Research analyst Alan Lim Seong Chun said the contract win should boost CBIP’s outstanding orderbook to an estimated RM480 million.

“This means earnings visibility until 3QFY15 for its palm oil mill manufacturing division. (We) Maintain our core earnings forecasst for both FY14E (RM98m) and FY15E (RM100m).

“We continue to like CBIP as it is poised to capture strong demand for palm oil mills this year and also for its steady margin improvements,” said Lim.

CBIP's financial year ends on December 31.

Lim said CBIP's latest contract win might lead to more contracts from Rimbunan Hijau for the latter's other maturing estates.

Meanwhile, Hong Leong Investment Bank also sees strong earnings visibility for CBIP given the latter's strong orderbook.

The is due to bright demand prospects for crude palm oil mills, according to Hong Leong analyst Chye Wen Fei.

"Based on our estimates, the latest contract announcement will boost CBIP’s total unbilled sales for the palm oil mill engineering division to ~RM485.7m, equivalent to 1.53x of the division’s turnover in 2013,"
Chye said.

Chye said Hong Leong raised its FY14 and FY15 earnings forecast by 1% to 14% for CBIP. This is to reflect higher contract wins and earnings before interest and taxation margin assumption at the special purpose vehicle division.

Kenanga and Hong Leong have higher TPs of RM4.42 and RM4.48 for CBIP shares respectively.

Kenanga's Lim said the research firm maintained its "outperform" call on the stock

Hong Leong however maintained its "hold" rating. Chye said “we believe further share price upside will likely be capped by its current valuation. Year to date, the share price has risen 33.2%.”