AmWatch - CB Industrial Product : Receives RM105.5mil contracts BUY, 15 Oct 2014

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CB Industrial Product : Receives RM105.5mil contracts    BUY

CB Industrial Product Holding Bhd (CBIP) has received RM105.5mil contracts from subsidiaries of Prosper Group. The first contract, which is worth RM57mil, is in respect of a 60 tonnes per hour Modipalm mill in Papua New Guinea. The second contract, which is worth RM48.5mil, is for the construction of a mill of a similar size in Malaysia.

We view the awards of the contracts positively as it would replenish CBIP’s order book and sustain its profitability in FY15F. Year-to-date, we estimate that CBIP has received more than RM300mil worth of contracts. We have assumed that the group would be awarded RM350mil worth of contracts in FY14F versus RM320mil in FY13.

As at end-March 2014, unbilled sales of CBIP’s manufacturing division stood at RM488mil while unbilled sales of its retro-fitting division was RM187mil. CBIP is gaining traction in countries like South/Central America, Papua New Guinea and Africa. About 20% to 30% of the group’s contracts in FY14F are expected to come from these countries. Indonesia and Malaysia are envisaged to account for the balance 70% to 80% of CBIP’s contracts.

Higher number of contracts from Central/South America and Papua New Guinea would help cushion a potential slowdown in Indonesia. New plantings in Indonesia have eased over the past few years due to scrutiny from environmental organisations and compliance with RSPO (Roundtable for Sustainable Palm Oil) guidelines. Maintain BUY on CBIP with an unchanged fair value of RM5.15/share.

Others :

Top Glove : A weak FY14               HOLD

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