CB Industrial Products (BUY; NEW)
Leveraging on the booming palm oil sector
- CBIP is involved mainly in the: (1) Provision of engineering support, commissioning and contracting works for palm oil equipment and mills; (2) Cultivation of oil palm and production of crude palm oil and palm kernel through its JV entities and associates; and (3) Retrofitting special purpose vehicles.
- The bases of our investment highlights for CBIP include:
- CBIP’s proven track record in the engineering division, evidenced by its strong orderbook and growing revenue contribution from the division;
- The bright demand prospects for palm oil mills, underpinned by both demand-pull and supply-push factors;
- It is a safe bet and proxy to the expanding palm oil sector worldwide; and
- Strong balance sheet.
- Excluding earnings contribution from the now disposed plantation operations in 2011 (RM56.6m net profit, based on our estimates), our 2012-2014 projected earnings indicate a 3-year CAGR of 16.5%.
- We are initiating coverage on CBIP with a BUY recommendation and SOP-derived TP of RM3.03.
Source: HLIB Research 5 March 2012
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