Bursa Malaysia Stock Watch
CI Holdings
kltrader
Publish date: Sat, 10 Jul 2010, 12:23 PM
kltrader
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RECOM Buy
PRICE RM2.31
? Maintain BUY. Our Small to Mid Cap Conference presented an opportunity for some fund managers to meet the management of CI Holdings (CIH) for the first time. In light of the contract breakdown between F&N (FNH MK, Underperform) and The Coca-Cola Company (TCCM), management talked about its agreements with PepsiCo during the Q&A session. It is confident that its relationship with PepsiCo will be intact as the two parties have a complementary relationship given that CIH?s products are not in PepsiCo?s line-up. We maintain our earnings forecasts and target price of RM3.28, pegged to an unchanged 20% discount to our 15x target market P/E to account for the stock?s relatively low liquidity. CIH remains firmly a BUY, with the potential re-rating catalysts being 1) capacity expansion, and 2) an increasingly marketable product line.
? Complementary relationship with PepsiCo. The relationship between CIH and PepsiCo started in 1973. The agreements between the two companies are renewed every five years and the current agreements will be up for renewal at end-CY11. Unlike F&N and TCCM whose soft drinks and fruit juices overlap, CIH and PepsiCo have a complementary relationship. CIH?s in-house products such as Chill (Asian drinks) are not available in PepsiCo?s product line-up. Management is, therefore, confident that its relationship with PepsiCo will be intact.
? Extra capacity for non-carbonated drinks. From 20% two years ago, noncarbonated drinks, led by Tropicana, now account for 40% of group sales, with the remaining 60% represented by carbonated drinks. The revenue split between noncarbonated drinks and carbonated drinks is expected to hit 50:50 in two years? time given the additional capacity at the Bangi facility. The RM45m new lines are expected to be operational by Sep, just in time for Hari Raya.
Yesterday, we hosted a Small to Mid Cap Conference which presented some fund managers an opportunity to meet the management of CIH for the first time. The company was represented by Syed Khalil Syed Ibrahim, VP of corporate finance and planning and Erwin Selvarajah, CEO of Permanis. In light of the contract breakdown between F&N and TCCM, management talked about its agreements with PepsiCo during the Q&A session.
The relationship between CIH and PepsiCo started in 1973. The agreements between the two companies are renewed every five years and the current agreements will be up for renewal at end-CY11. Unlike F&N and TCCM whose soft drinks and fruit juices overlap, CIH and PepsiCo have a complementary relationship. CIH?s in-house products such as Chill (Asian drinks) are not available in PepsiCo?s product line-up. Management is, therefore, confident that its relationship with PepsiCo will be intact. Meanwhile, on 3 Jun, CIH announced its proposed purchase of land and warehouse in Bangi industrial estate for RM29.5m, which will be funded by internal funds and bank borrowing. The acquisition is necessary because the current warehouse measuring 200,000 sq ft is already bursting at the seams given the company?s swift growth in recent years.
CIH?s 3QFY6/10 was the fourth straight quarter of results outperformance. FY10 is set to be a record year for the company. We forecast a net profit of RM35m (+67% yoy), with much of the earnings growth coming from Tropicana fruit juices and Lipton Tea variants. We are looking at an FY10 DPS of 10 sen, which gives a decent yield of 4.3%.
Maintain BUY. We maintain our earnings forecasts and target price of RM3.28, pegged to an unchanged 20% discount to our 15x target market P/E to account for the stock?s relatively low liquidity. CIH remains firmly a BUY, with the potential re-rating catalysts being 1) capacity expansion, and 2) an increasingly marketable product line.
52-weeks Share Price Range (RM) RM1.04/RM2.54
Major Shareholders: %
Datuk Johari Abdul Ghani 28.2
Continental Theme Sdn Bhd 11.1
PNB 5.7
By CIMB
Analyst: Norziana Mohd Inon
PRICE RM2.31
? Maintain BUY. Our Small to Mid Cap Conference presented an opportunity for some fund managers to meet the management of CI Holdings (CIH) for the first time. In light of the contract breakdown between F&N (FNH MK, Underperform) and The Coca-Cola Company (TCCM), management talked about its agreements with PepsiCo during the Q&A session. It is confident that its relationship with PepsiCo will be intact as the two parties have a complementary relationship given that CIH?s products are not in PepsiCo?s line-up. We maintain our earnings forecasts and target price of RM3.28, pegged to an unchanged 20% discount to our 15x target market P/E to account for the stock?s relatively low liquidity. CIH remains firmly a BUY, with the potential re-rating catalysts being 1) capacity expansion, and 2) an increasingly marketable product line.
? Complementary relationship with PepsiCo. The relationship between CIH and PepsiCo started in 1973. The agreements between the two companies are renewed every five years and the current agreements will be up for renewal at end-CY11. Unlike F&N and TCCM whose soft drinks and fruit juices overlap, CIH and PepsiCo have a complementary relationship. CIH?s in-house products such as Chill (Asian drinks) are not available in PepsiCo?s product line-up. Management is, therefore, confident that its relationship with PepsiCo will be intact.
? Extra capacity for non-carbonated drinks. From 20% two years ago, noncarbonated drinks, led by Tropicana, now account for 40% of group sales, with the remaining 60% represented by carbonated drinks. The revenue split between noncarbonated drinks and carbonated drinks is expected to hit 50:50 in two years? time given the additional capacity at the Bangi facility. The RM45m new lines are expected to be operational by Sep, just in time for Hari Raya.
Yesterday, we hosted a Small to Mid Cap Conference which presented some fund managers an opportunity to meet the management of CIH for the first time. The company was represented by Syed Khalil Syed Ibrahim, VP of corporate finance and planning and Erwin Selvarajah, CEO of Permanis. In light of the contract breakdown between F&N and TCCM, management talked about its agreements with PepsiCo during the Q&A session.
The relationship between CIH and PepsiCo started in 1973. The agreements between the two companies are renewed every five years and the current agreements will be up for renewal at end-CY11. Unlike F&N and TCCM whose soft drinks and fruit juices overlap, CIH and PepsiCo have a complementary relationship. CIH?s in-house products such as Chill (Asian drinks) are not available in PepsiCo?s product line-up. Management is, therefore, confident that its relationship with PepsiCo will be intact. Meanwhile, on 3 Jun, CIH announced its proposed purchase of land and warehouse in Bangi industrial estate for RM29.5m, which will be funded by internal funds and bank borrowing. The acquisition is necessary because the current warehouse measuring 200,000 sq ft is already bursting at the seams given the company?s swift growth in recent years.
CIH?s 3QFY6/10 was the fourth straight quarter of results outperformance. FY10 is set to be a record year for the company. We forecast a net profit of RM35m (+67% yoy), with much of the earnings growth coming from Tropicana fruit juices and Lipton Tea variants. We are looking at an FY10 DPS of 10 sen, which gives a decent yield of 4.3%.
Maintain BUY. We maintain our earnings forecasts and target price of RM3.28, pegged to an unchanged 20% discount to our 15x target market P/E to account for the stock?s relatively low liquidity. CIH remains firmly a BUY, with the potential re-rating catalysts being 1) capacity expansion, and 2) an increasingly marketable product line.
52-weeks Share Price Range (RM) RM1.04/RM2.54
Major Shareholders: %
Datuk Johari Abdul Ghani 28.2
Continental Theme Sdn Bhd 11.1
PNB 5.7
By CIMB
Analyst: Norziana Mohd Inon
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