CBIP’s nearterm prospects weak, but values emerging

KUCHING: CB Industrial Product Hold ing Bhd’s (CBIP) near-term prospects in replenishing its orderbook will likely remain weak but analysts bel ieve that its value is emerging given its promising plantation assets in Sarawak and Kalimantan.

Hong Leong Investment Bank Bhd’s research arm ( HLIB Research) in a report, said: “While nearterm prospects of CBIP replenishing its orderbook at both its oil mill engineering and SPV divisions will likely remain weak, we bel ieve CBIP is worth a relook as value has emerged.”

It opined that CBIP’s near- term prospects at replenishing both its oi l mill engineering and SPV divisions’ ( which are its bread and butter) orderbook would likely remain weak, on the back of persistently low crude palm oil (CPO) price environment, which has in turn resulted in slowerthanexpected orderbook replenishment at the oil mill engineering division.

It also pointed out that CBIP’s oil mill engineering and SPV divisions could be affected by ministerial position changes ( post 14th General Election results), which would likely result in delays in new contract awards at the SPV division.

Nevertheless, it highlighted that despite the weak nearterm job replenishment prospects, there is sti l l value in CBIP, given its plantation assets in Sarawak (through associate and joint ventures) and Kalimantan ( 32,000 hectare, of which approximately 11,574 ha, or 36 per cent has already been planted as at March 2018), and net cash of RM42.7 million (or eight sen per share as at March 31, 2018).

“Based on our assumptions, we conservat ively value CBIP’s land bank at RM15,000 per ha (for planted area) and RM500/ ha ( for unplanted area), which is lower than current market valuations (of at least RM30,000/ ha for planted area),” it added.

Overall, HLIB Research maintained its ‘ buy’ call on the stock.

It pegged a sum- of- parts target price of RM1.69 to RM1.55 per share for the stock.

It noted, “Following recent share price retracement – which has retraced by 25 per cent YTD – we believe CBIP is worth a relook as value has emerged.

“At share price of RM1.30, the market is pricing CBIP’s effective planted plantation land bank (18,605 ha) at only RM8,350 per ha, assuming engineering division is valued at eight- folds FY19 earnings, net cash of RM42.7 million remains, and zero value for its 20,000 ha of unplanted land bank.”