“We expect CBIP’s engineering and contracting (E&C) division’s pre-tax profit to grow 3% year-on-year in FY2010 driven by higher contract billings. For the plantation division, we expect FY2010 pre-tax profit to increase significantly to RM21.9 million from FY2009’s RM6.3 million,” said HwangDBS in a report yesterday.
It expected CBIP’s plantation associate to show a smaller loss of RM1 million for the second half of 2009, versus a loss of RM9.3 million for 1H09 in the absence of natural disasters and seasonally higher fresh fruit bunches (FFB) yields.
“This improvement is also driven by lower production cost and improved milling revenue from Solar Green, following the upgrade of its mill in Sept. As a result, our group FY09 to FY11 forecast earnings were raised by 8.2%, 3.6% and 4.4% respectively.”
HwangDBS expects CBIP’s net profit for FY09, FY10 and FY11 to come in at RM43 million, RM57 million and RM60 million, respectively.
“We see growing acceptance in CBIP’s patented ‘continuous sterilisation process’ mill or modipalm with repeat orders from existing clients. For example, Wilmar International ordered three units of 45 tonne per hour modipalm and PT Astra Agro Lestari ordered one 45 tonne per hour modipalm this year,” said HwangDBS.
It also expects CBIP to secure an additional RM127 million worth of contracts by end-2009.
“For the year to date, CBIP has clinched in total new contracts worth RM123 million, or 49% of our 2009 expectation of RM250 million. We think there is a more than 50% chance that CBIP would meet our target as historically, 60% to 70% of contract wins are in the second half.”
CBIP’s total unbilled order book stood at RM297 million as at Sept 10.
The research house was also positive on CBIP’s move to strengthen its balance sheet by paring down its high borrowings.
“We think the re-rating catalysts for the stock would be higher-than-expected E&C margins, stronger-than-expected FFB yields, crude palm oil prices and turning around at plantation associates,” said HwangDBS.
Another potential revenue driver for the group is its new zero-effluent treatment system that CBIP is planning to launch in mid-2010.
Yesterday, CBIP closed at RM3.19, up six sen.
This article appeared in The Edge Financial Daily, September 16, 2009.