Friday 2 November 2012

CB Industrial Product Holdings Bhd - 9MFY12 PBT Surges 62% Y-o-y


CB  Industrial  Product  Holdings  Bhd  (CBIP)’s  9MFY12  results  were  above  our  expectation,  with  its  core  net  profit  of  RM75.5m  making  up about 82% of our full-year estimate. The better-than-expected results were due to higher than expected contribution from the SPV segment. As management has  declared a  second  interim tax exempted dividend of  5.0 sen, we are adjusting our full-year dividend estimate to 25.0 sen per share to reflect the higher dividend. We are fine-tuning our forecasts to reflect the better than expected SPV segment contribution. We maintain buy call with a higher FV of RM3.31, pegged to the stock’s 5-year average PER of 9x. 
 
Above forecast. CBIP’s 9MFY12 results beat our expectation, clocking in a YTD core net profit of RM75.5m that met 82% of our full-year target on the back of a 62% jump in revenue to RM373.6m. The 9M net profit of RM215.1m included a disposal gain of RM139.6m. However, stripping off  the  gains  from  its  discontinued  plantation  operations  in  Sarawak,  the company’s 9M  net  profit  would  have  normalised  to  RM75.5m.  Its 3QFY12 core  net  profit was  higher at RM27.1m (-1.0% y-o-y, +14.5% q-o-q) on better contribution from both palm oil equipment and special purpose vehicle (SPV) segments while that from its palm plantation segment fell due to lower production and lower CPO prices. Both the palm oil equipment and SPV segments had total unbilled sales of RM380m and RM295m respectively as at end-September 2012, equivalent to 2.1x the group’s total FY11 revenue.
 
Second interim dividend of 5.0 sen. CBIP is proposing a second interim tax exempt dividend of 5.0 sen. Including the first interim tax exempt dividend of 10.0 sen less 25% tax, bringing the total net dividend to 15.0 sen per share for 9MFY12. We are moving up our FY12 net dividend estimate  to  25.0  sen  for  FY12  to  incorporate  the  surprise  dividend  following  the  disposal  of  CIP’s Sarawak  plantation  operation.  This  would translate into a decent gross dividend yield of 12.3% (or net dividend yield of 9.2%) for FY12.

Acquiring another piece of  land  in Indonesia. Following the  purchases of  plantation land in May  and  August this year, the company has  also announced its third land acquisition in Indonesia, for a sum of RM7.4m. The said 14,769.75 ha land is a piece of greenfield in Kalimantan (please see  the  green  zone  in  Figure  2).  This  purchase  will  boost  the company’s total  plantation  landbank  to  about  60,000  ha.  Management  has indicated that CBIP will embark on aggressive planting plan on about 10,000 – 13,000 ha per annum starting from 2013.
 
Maintain  BUY,  RM3.31  FV.  We  continue  to  like  CBIP’s:  i)  prudent  management,  ii)  strong  orderbook  in  its  manufacturing  and  SPV  segments, and  iii)  aggressive  expansion  in  palm  oil  plantations  in  Indonesia.  We  are  fine-tuning  our  forecasts  to  reflect  a  better-than-expected  SPV segment contribution. Maintain BUY on CBIP, with higher FV RM3.31, pegged to a five-year average PER of 9x on the company’s FY13 earnings. BUY.
Source: OSK

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