CB Industrial Product Holding Bhd ('CBIP') is involved in the manufacture and sales of palm oil mill equipment and related spare parts. It is also involved in the cultivation of oil palm, and production of crude palm oil and palm kernel. Its oil palm estates are quite sizable, with total land area of 44059 hectares. Of this, the planted area is about 29814 hectares. After discounting for minority interest, the Group's effective share of planted area is about 15877 hectares. See the table below. For more, go (here).
Table 1: CBIP's oil palm estates
Corporate Exercise pending
CBIP has just announced a generous bonus issue of 1-for-1 today, which caused a jump in the share price. This is in addition to the dividend in specie where the date of entitlement is on April 27 where CBIP will distribute its Treasury shares to its shareholders on the basis of 1-for-20.
Recent Financial Results
For QE31/12/2010, CBIP's net profit dropped 4.4% q-o-q while turnover increased by 37%. The company attributes the "lower profit in the current quarter ... to higher allowance for doubtful receivables recognized during the quarter. In addition, a gain on disposal of property during the immediate preceding quarter also had resulted higher profit for the quarter". On the other hand, net profit jumped 68.4% y-o-y on the back of a 55%-jump in turnover.
Table 2: CBIP's last 8 quarterly results
Chart 1: CBIP's last 16 quarterly results
Financial Position
CBIP's financial position is deemed satisfactory as at 31/12/2010. Its current ratio stood at 1.31 times while debts to equity stood at 0.46 time.
Valuation
CBIP (at RM4.32 as at 12.00 noon today) is now trading at a PE of 8.2 times (based on last 4 quarters' EPS of 53.02 sen). At this multiple, CBIP is deemed fairly attractive when compared to plantation stocks such as KLK, IOI & UMcca which are all trading at PE of 18 times. I do not think that CBIP should be subject to a hefty discount because it has a sizable engineering division. This is especially so as the plantation division has outgrown the engineering division. See the table below.
Table 2: CBIP's segmental report for FY2010
Technical Outlook
CBIP rallied on the announcement of the bonus issue today. From Chart 2, we can see that the stock has broken above its medium-term downtrend line at RM4.10. Its immediate resistance is the horizontal line at RM4.40. See Chart 3 below.
Chart 2: CBIP's daily chart as at April 21, 2011 (Source: Quickcharts)
Chart 3: CBIP's weekly chart as at April 21, 2011 (Source: Quickcharts)
Conclusion
Based on good financial performance & financial position, attractive valuation & positive technical outlook, CBIP could be a trading BUY as well as a medium-term investment stock.
8 comments:
hi bro alex. please comment on PJI and PJI-wa. can buy now ?? i heard PJI will goreng to 30sen, i eyeing PJI-wa now. please reply me asap !!! thx alots my dear bro alex.
Hi wong
I am not familiar with PJI. PJI broke above the horizontal line at RM0.18 recently. It failed twice to surpass the psychological level of RM0.20. If it can break above the RM0.20 level, its next resistance is at the horizontal line of RM0.24-0.25.
PJI is just one of many 2nd & 3rd liners which could be played up in the present environment. Be sure to treat it as a trading stock. Do not hold it for long term if the fundamental does not justify it.
Hi!
Our market volume has been very low for the past few days especially on Friday. Is it an indication that major correction is coming soon?
Tx!
I have noticed that Bkoon has reached RM0.40 last week. Will it continue to surge up?
Hi Alex,
What do you think of Yinson share chart? What is the upside?
Hi Nick
You may have seen my post on Yinson (here). It is a fairly attractive stock. Chartwise, it faces a strong horizontal resistance at RM1.10. If it can surpass this resistance, it may go to RM1.50 (or, even RM2.00).
Hi luckystock
The low market volume indicates less buyers & sellers agreement on prices. Most of those who have shares want higher prices & are not willing to sell. The potential buyers are not buying because they feel that the prices are not low enough.
Is it an indication that major correction is coming soon? Not necessarily. It is merely a pause and the next market direction could be either up or down or even sideway. To be sure, a market lull after a prolonged bull would always remain us of the sustainability of the bull market. Can this aging bull still charge higher? This remains me of an interesting passage [taken from “The Money Game” by Adam Smith (aka Jerome Goodman)] quoted by the fund manager, Jeffrey Saut in one of his article entitled " The Clock has No Hands? ". To wit:
“We are at a wonderful ball where the champagne sparkles in every glass and soft laughter falls upon the summer air. We know at some moment the black horsemen will come shattering through the terrace doors wreaking vengeance and scattering the survivors. Those who leave early are saved, but the ball is so splendid no one wants to leave while there is still time. So everybody keeps asking – what time is it? But, none of the clocks have hands.”
Hi hendytth
Good of you to bring BKoon to my attention. The stock seems to be in a formation called "the Cup with Handle". The Cup is represented by the price action from June 2009 to February 2011. The Handle is represented by the follow-up price action. If the price can surpass the RM0.40 level, we may have a bullish breakout for BKoon. At that point, this stock could be a good trading BUY>
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