CBIP’s 1QFY14 results were in line. We lower our forecasts slightly  to account for higher startup losses at its Indonesian plantation unit. Post earnings revision and the rollover of our valuation period to CY15 (from CY14), we tweak our  SOP-based FV  to MYR4.95 (from MYR5.00).  While we continue to be positive on CBIP’s prospects, we believe valuations are fair at these levels. Maintain NEUTRAL.

• In line. CB Industrial Product (CBIP)'s 1QFY14 core net profit was in line with  our  and  consensus  estimates,  coming  in  at  23-24%  of  FY14 forecasts. No dividend was declared during this quarter.  
• Core  net  profit  rose  24.7%  y-o-y,  revenue  contracted  18.4%  y-o-y.The  decline  in  its  topline  was  mainly  due  to  a  57.7%  drop  in  revenue from  the  vehicle  retrofitting  division  due  to  lower  project  completion during the period. This, however, was offset by a 22.6% rise in the oil mill engineering division  caused by higher project billing.    Despite the lower topline  numbers,  core  net  profit  rose  as  a  result  of  a  higher  margin  of 26.7%  (from  25.4%  in  1QFY13)  achieved  at  the  oil  mill  engineering division and  at the vehicle retrofitting unit  of 7.2% (vs 7% in 1QFY13). This  was  offset  slightly  by  a  MYR2.2m  pretax  loss  at  the  plantation division – caused by startup costs at its Indonesian estates.
• Tweaking  earnings  downwards.  Despite  the  in-line  earnings,  we  are revising down our FY14-15 forecasts by a slight 4-5%, after taking into account  the  higher  losses  at  its  plantation  division  in  Indonesia,  which were due to startup costs.
• Maintain  NEUTRAL.  Post  earnings  revision  and  after  rolling  over  our valuation base to CY15 (from CY14), our SOP-based FV drops slightly to MYR4.95 (from MYR5.00).  Our valuation targets are unchanged,  at a 9x P/E  for  its  associate  plantation  business  and  a  13x  P/E  for  its  oil  mill engineering  and vehicle retrofitting division.  Although we continue to be positive  on  CBIP’s  prospects,  we  believe  valuations  are  fair  at  these levels.  As  such,  we  maintain  our  NEUTRAL  recommendation  on  the stock. 

Source: RHB