For QE30/9/2012, CBIP's net profit declined by 83% q-o-q or 1% y-o-y to RM27.1 million while revenue was mixed; dropped by 28% q-o-q but rose 14% y-o-y to 109 million. The top-line dropped q-o-q due to the lower project billing by the special purpose vehicles segment. The decline in bottom-line on q-o-q basis was due to exceptional gain of RM139.6 million from the sale of two subsidiaries. If this exceptional gain is excluded, net profit rose about 14% due to higher contribution by the associates and a jointly controlled entity (due to improvement in palm oil production).
Table 1: CBIP's last 8 quarterly results
From QE31/3/2012, the financial performance of the two subsidiaries that were sold, were not included into the account. Prior quarterly results were adjusted accordingly. For comparison purposes, the P&L figures that do not include the performance of these two subsidiaries are stated in bold.
Chart 1: CBIP's last 23 quarterly results
Existing Operation
The main businesses of CBIP are:
- Palm oil mill equipment and
related products & Contracting works
- Retrofitting special purpose
vehicles
Despite the disposal of its two subsidiaries involved in oil palm cultivation, CBIP still has fairly sizable exposure to oil palm cultivation, via its associates & a JV entity. It also has a subsidiary that is currently planting its estate. These associates & JV entity contributed RM11.3 million to the group pre-tax profit of RM79.2 million for 9-month ended 30/9/2012.
Table 2: CBIP's Oil Palm Assets in 2011
Valuation
CBIP (closed at RM2.75 yesterday) is now trading at a PE of 6.9 times (based on annualized EPS of 40.4 sen). At this multiple, CBIP is deemed fairly attractive.
Technical Outlook
CBIP is still in an intermediate uptrend line, with support at RM2.70. Overhead resistance is at RM2.85, from the line connecting the recent peaks. From the weakly chart, the stock looks toppish after a long uptrend.
Chart 2: CBIP's daily chart as at Nov 2, 2012_9.30am (Source: Quickcharts)
Chart 3: CBIP's weekly chart as at Nov 2, 2012_9.30am (Source: Quickcharts)
Conclusion
Based on good financial performance & attractive valuation, CBIP is a good stock for long-term investment. The concern is on the uncertain outlook for CPO and the uncertain technical outlook. For now, this stock is rated a HOLD.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, CBIP.
4 comments:
hi, do you have any comment of TIGER 7079 stock? and scomi
CBIP is no more in the oil palm plantation business after selling its estates. Is that a smart move?
Do you think the company foresaw a plunge in palm oil price?
The palm oil price trend is worrying. While soybean price has gone up a lot (that means soyoil price has gone up a lot too), palm oil price has moved a lot in the opposite direction. That means despite soyoil being much more expensive, people still prefer it to palm oil. What is the reason? Is there a boycott of palm oil? Is there something not right in palm oil? Lots of questions without answers.
The divergence between palm oil price and the share prices of oil palm plantation counters is another mystery? Doesn't the sharp drop in palm oil price mean the oil palm companies are now mostly overvalued? Yet why are they not getting cheaper? Is someone supporting them? Will they eventually correct soon? Hm..lot of unanswered questions as well.
Production cost of palm oil is said to be about RM1200 per tonne. Even at the current price, the plantation are making 100% margin. That is making a lot still. Is this the fair price for palm oil? Why should it go up any further and let the plantation make fat profits? More questions come to mind.
Looks like there will be lots of volatility ahead in this sector. Dont you think so?
Hi Mr Lonely,
Tiger has proven that it can leap very high. Its immediate resistance is at RM0.50 & RM0.75.
We do not know what's happening in this stock. Those who bought into the stock are expecting a good play where they can make some money. The story may be very appealing but that is just icing on the cake. Success depends on getting more people to jump into the stock, so that those who got in earlier would come out ahead.
HI zhouyu44,
"Production cost of palm oil is said to be about RM1200 per tonne. Even at the current price, the plantation are making 100% margin."
That statement may be true. But bear in mind that a lot of good news has been factored into the share price. For the share price to go higher, we need more good news, not the same old good news. And, it doesn't take a lot for share price to come tumbling down. It doesn't take bad news, just not-so-good news. That was what happened recently.
Why are share prices still strong when CPO prices dropped substantially. The reason was given by you- the profit was still there. recently , the profit of many plantation companies were lower but still commendable. Investors expect profit to recover when x acres of estates matured in x years.
One of the top hedge funds managers (whose name I've forgotten) said that there are two things that investors must avoid:
1. Running with the herd; and
2. Projecting forward based on past information.
Both are things that we always do but when do you ask: Should I stop now? Try asking that question to those chasing consumer stocks today, like I asked that same question to those clamoring for plantation stocks. As investor, sometimes we must take a stand that makes us stood out in the crowd. No one wants to be sticking out like a sore thumb, so we run with the herd. As the herd charges up a hill, it can't see the cliff underneath their feet... until it is too late.
I hope that answer your question.
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