CB Industrial Product Holding vs. Muar Ban Lee Group

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.


CB Industrial Product Holding Berhad's (hereafter called "CBIP") principal activities including investment holdings, manufacturing and trading palm oil mill equipment and related spare parts, provision of engineering support, commissioning and contracting works for palm oil mills, cultivation of oil palm and production of crude palm oil and palm kernel, constructing mills, factories, building, composting efflluent plants and contracting works. Muar Ban Lee Group Berhad's (hereafter called "MBL") principal activities including manufacturing oil seed expeller and related parts and automated kernel crushing plants and related parts.


Side-by-side Comparison

* Data of both companies above is extracted from it's unaudited 4Q report of 2011. MBL was listed in 2009.

Capitalization
Measure by size, CBIP was a lot bigger than MBL, approximately 9 times the size of MBL.


Income Items
Important items under this section is per share earnings and dividend, CBIP is all time winner in per share earnings and dividend.

Balance Sheet Items
CBIP have adequate balance sheet, it's Current assets is close to cover the Total liabilities, however MBL have very solid balance sheet, as it's Cash and cash equivalents is more than enough cover their Total liabilities. MBL is a cash-rich company.


Ratios
Price-wise, both companies traded equally at multiples of their most recent earning. MBL more attractive at the moment given it sell at much lower multiple of book value per share currently compared to CBIP. The Net income/sales of CBIP is slightly better than MBL. CBIP achieved much better return on book value per share compared to MBL, 12% different. From the surface, this may due to CBIP's adoption of leverages measured by Total liabilities/book value, 0.75. But when look closely, merely 102 millions out of 261 millions of Total liabilities is bank borrowings.


Earning growth rate of CBIP was really impressive. No comparable data for MBL as it was listed in 2009.


Price Record
CBIP has much higher price growth rate in the near-term (taking consideration of it's recent bonus issue 1 for 1) and long-term.


Financial Summary

CBIP's Financial Summary

By looking into detail of the financial summary of CBIP, the company achieved impressive historical results, growing it's sales and profit every year except 2009 which gain lower sales and profit. Rates of return and profit margins are impressive also especially in 2011. As 50 millions of 127 millions of pre-tax profit of CBIP was contributed from oil palm plantation & milling segment based on the unaudited 4Q2011 report, the disposal of two main plantation subsidiaries of the company and acquisition of 94% of 32,812 hectares oil palm plantation land located in Kalimantan Tengah, Indonesia (related reply to Bursa Malaysia) will have significant impact to the capital allocation and future profitability of the company, the historical results of company have no indication to it's future profitability, further analysis required after the completion of disposal and acquisition.

MBL's Financial Summary

By looking into detail of the financial summary of MBL, the company achieved impressive result, growing it's sales and profit every year except 2011 which gain lower profit. 3-year average of return on average equity is 16% and profit margin is 24%, the management is doing the job well given the company adopt minimal leverages.
As CBIP required further analysis in third quarter of 2012, I will value how much MBL worth in this post.


How Much MBL Worth
Given the company CAGR of EPS is 15% (approximately 18.9% in the past 3 years) and Dividend Per Share is 15% in the next 10 years, the EPS of the company will be RM$0.193 in 2021 (included adjustment of 2 bad years in 10 which reduce 40% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$0.66 (included adjustment of 2 bad years).


If the stock price of MBL sell at 5 times earning in 2021, it is RM$0.96 and included total dividends received, it is RM$1.62 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$1.62 discounted to today price, it is RM$0.96 per share.


The discounted price is 11.38% lower comparing to today (27 March 2012) closing price RM$0.85. In my opinion, the stock is discounted in moderate margin, what do you think?