STOCK FOCUS OF THE DAY
CB Industrial: Sluggish order book HOLD
Maintain HOLD on CB Industrial Product Holding (CBIP) with a lower fair value of RM1.36/share (vs. RM1.45/share previously). Our fair value is based on an FY19F fully diluted PE of 10x. In the past five years, CBIP’s PE ranged from a low of 9.0x to a high of 14.0x. Average PE was 11.5x.
CBIP’s 87.4mil warrants will expire in November 2019. As the exercise price of the warrants is RM2.40/share compared with CBIP’s share price of RM1.32, the warrants are out-of-the-money. We have increased CBIP’s FY18F net profit by 15.5% to account for a recovery in the operating profit margin of the mill manufacturing division. The unit’s EBITDA margin is expected to normalise to 22% in FY18F after being hit by cost overruns and impairments in FY17.
We do not expect the plantation division to swing into profitability any time soon as the oil palm trees are still young and CPO prices are in the doldrums. CBIP’s plantation unit in Kalimantan has been bleeding since FY12. Mature areas stood at 3,000ha to 4,000ha as at end-FY17.
RETAIL RESEARCH
Stocks On Radar: Paramount Corporation, PIE Industrial, Ekovest, DRB-Hicom
ECONOMIC HIGHLIGHT
Malaysia: Expect BNM to maintain policy rate
NEWS HIGHLIGHTS
Credit default swap: Malaysian debt risk on uptrend
Hai-O: net profit down on lower contribution from MLM business
T7 Global: Keen to proceed with ECRL project despite lower cost
MSM: Prepares for sugar liberalisation
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