KUALA LUMPUR (Nov 16): AllianceDBS Research has downgraded CB Industrial Product Holdings Bhd (CBIP) to “Hold” (from Buy) with a higher target price of RM2.14 (from RM2.10).

In a note today, AllianceDBS Bank vice president for equity Char King Yoong said CBIP is poised to release its 3QFY15 results on 18 Nov.

“We expect the group to register 3Q net earnings of RM15 million-RM16 million, bringing its 9M earnings to about RM56 million, accounting for only about 66% of our full-year estimates.

“We believe the potential shortfall could come from lower contributions from its SPV operations and other income,” he said.

Cheah said the persistently low CPO price (house estimates of RM2,200/tonne and RM2,340/tonne average for 2015 and 2016, respectively), and the ongoing El Nino phenomenon which will lead to lower fresh fruit bunch (FFB) production, could induce plantation players to scale back capex.

He said this could hurt CBIP’s operations.

“In fact, we observe that he group secured all its major contracts in 1H2015. Since then, orderbook replenishment has been slow,” he said.

“We have conservatively trim our FY15-17 forecasts by 2-8% to account for the combined effects of (1) potentially weak 3QFY15 results, (2) lower orderbook replenishment assumption and slower revenue recognition from its POE segment, in view of continued depressed CPO price,” he said.