- Maintain a BUY on CB Industrial Product Holding Bhd (CBIP)
with an unchanged fair value of RM3.00/share. Our fair value is based on an
FY13F PE of 10x.
- The group’s PE band ranged from a low of 3x to a high of 21x
in the past seven years. Average PE was 10x.
- CBIP’s 9MFY12 results were slightly above consensus estimates
but in line with our expectations. The group has declared a second interim
dividend of 5 sen/share, which brings total gross dividends to 15 sen/share for
9MFY12.
- To be conservative, we have forecast a gross DPS of 15 sen
for FY12F, which implies that CBIP would not be paying anymore dividends for
4QFY12. The gross DPS of 15 sen for FY12F suggests a yield of 5.5%.
- CBIP’s turnover surged 62% YoY to RM373.6mil in 9MFY12,
underpinned by an increase in the construction order book and pre-tax margin of
the mill construction division.
- CBIP secured 18 construction contracts in FY11 with a value
of RM313.2mil. In comparison, the group won 14 contracts in FY10 with a total
value of RM178.6mil. CBIP takes about 12-18 months to complete each
construction contract.
- As a result, turnover of the mill construction division climbed
25.3% YoY to RM250.9mil in 9MFY12 while pre-tax profit surged 113.6% YoY to
RM59.7mil. Pre-tax profit margin of the division improved from 14% in
9MFY11 to 24% in 9MFY12.
- As at end-June 2012, the unbilled sales of CBIP’s mill construction
division stood at RM379.5mil.
- CBIP yesterday proposed to acquire 16,611ha of land in Central
Kalimantan for RM7.4mil. The land consists
of 14,770ha of convertible production forest and 1,841ha of “other purpose
area” which can be used to plant oil palm.
- The proposed acquisition would bring the group’s total plantation
landbank to 53,884ha.
- Most of the group’s plantation landbank in Kalimantan are unplanted.
CBIP is expected to commence plantings in FY13F. New plantings are envisaged to
be 5,000ha to 8,000ha per year.
Source: AmeSecurities
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