CB Industrial Product Holding Bhd
(May 6, RM2.03)
Maintain hold with an unchanged target price of RM2.33: CB Industrial Product Holding Bhd (CBIP) has received a US$21 million (RM74.97 million) contract from PT Sinar Mas Group to carry out mechanical, civil and electrical works for a 40/80 tonnes per hour Modipalm mill in Liberia. 

This is CBIP’s fourth announcement of a contract this year. Including this contract, we estimate that CBIP has received more than RM250 million contracts this year.

Although CBIP is close to achieving our assumption of RM270 million worth of contracts for the financial year ending Dec 31, 2015 forecast (FY15F), we are not revising the group’s FY15F earnings forecast yet. CBIP received RM270 million worth of contracts in FY14 compared with RM320 million in FY13.

We view the contract from PT Sinar Mas positively as it would sustain its profitability. Each palm oil mill contract is expected to last CBIP between 12 and 18 months. 

As at the end of December 2014, unbilled sales of CBIP’s mill construction division stood at RM445 million.  Also, the mechanical and electrical works portion of the contract from PT Sinar Mas Group is likely to command higher profit margins. 

CBIP has also announced a first single-tier interim dividend of 3 sen per share ahead of its first quarter of FY15 (1QFY15) results at the end of the month. We have assumed a gross dividend per share (DPS) of 7 sen for CBIP in FY15F compared with 8 sen in FY14. The gross DPS translates into a decent dividend yield of 3.4% for FY15F. — AmResearch, May 6

This article first appeared in The Edge Financial Daily, on May 7, 2015.