CB Industrial Products - Declares 30 sen tax exempt final dividend HOLD

- CB Industrial Product Holding Bhd (CBIP) has declared an interim tax exempt dividend of 30 sen/share for FY11.

- In the FY11 results announcement released in February 2012, the group had not declared any dividend payment. 

- CBIP practises the policy of only declaring final dividends after the results announcement.

- The dividend entitlement and payment dates for the 30 sen payout will be announced later.

- As the disposal of the plantation assets has not been completed yet, we reckon that CBIP would be paying the dividends from its cash reserves first. As at end-FY11, CBIP’s gross cash amounted to RM70.4mil. 

- In our earnings forecast, we have assumed that the disposal of the plantation assets would be completed by mid-FY12F.  

- The 30 sen tax exempt dividend would cost CBIP about RM83mil in total. 

- The 30 sen dividend would also translate into an attractive yield of 10.5% for FY11.

- Although the market had been expecting CBIP to declare higher dividends from the disposal proceeds of the plantation assets, we had thought that the incremental dividends would only come in 2HFY12. 

- Hence, the earlier-than-expected announcement is a  surprise. We had forecast CBIP to declare a final dividend of 10 sen/share for FY11.

- For FY12F, we expect gross dividend payments to normalise. 

- We are currently forecasting a gross DPS of 6 sen, which translates into a yield of 2.1% for FY12F. 

- Maintain HOLD on CBIP with fair value of RM2.85/share.

Source: AmeSecurites