CB Industrial Product Holding Berhad (CBIP) caught my attention last week when I was searching around for good companies to invest in. I decided to look further into its business model. CBIP is engaged in 3 business segments being the palm oil engineering, retrofitting special purpose vehicles and oil palm plantation and milling.
Some of you might be scratching your head now because CBIP is not involved in selling the day-to-day products which you get to see everyday such as Nestle, F&N, Spritzer etc. Don't worry, if you don't feel comfortable investing in a business which you can't understand, there are always many other opportunities out there to serve you.
For those who are familiar with CBIP and wish to know more about it, there are a few things I would like to share with you from the company's visit.
1) It is the first publicly-listed player in the palm oil engineering industry globally mainly focusing in Indonesia and Malaysia.
2) Palm oil engineering is CBIP's major contributor with close to 80% of revenue contribution.
3) CBIP is a one-stop centre turnkey contractor for Modipalm Continuous Sterilization palm oil mills. Its services and products are earthwork/site preparation, civil construction, mill engineering and supply, installation, testing and commisioning of machinery and equipment.
4) Key benefits of CBIP's Modipalm Continuous Sterilization palm oil mills are higher oil extraction rate, lower operating costs, lower maintenance costs and better safety.
5) There has been a total of 102 Modipalm Continuous Sterilization mills constructed by CBIP to date.
6) Profit before tax has grown from RM 71 million in FY11 to RM 140 million in FY15. However, net profit after tax has remained relatively stable in the past 5 years at about RM 100 million. The main culprit, which pushed up CBIP's tax payable is the expiry of pioneer tax status.
7) There has been an influx of new clients. In FY11, new clients accounted for only 29%. However, in FY15, it has increased to 70%.
8) Most of the plantations are still young and immature, ranging from 0-5 years. The management expects this segment to contribute significantly in a few years' time.
This blog post is to serve those that are familiar with CBIP. If you think that it's hard to understand this business, even after reading the annual report, my advice is to stay away from investing in this company.
CBIP (7076) - 8 Things I Learned From CBIP's Visit