Results

• C.I. Holdings Berhad (CIH) registered a PATAMI of RM3.1m in 4QFY19 which tumbled 53.7% qoq and 43.2% yoy. Both QoQ and YoY performances were dragged down by lower olein prices coupled with lower exports of full container loads (FCLs).

• As for full year FY19, the Group recorded a PATAMI of RM19m which was down 39% yoy. On the same note, revenue also tumbled 12.7% yoy to RM2.3b.

• Below expectations. CIH’s 12MFY19 PATAMI only meets 90.5% and 94.1% of ours and market earnings forecast given lower than expected margin.

Comments

• Discouraging QoQ…. Revenue and PBT slid 27.8% qoq and 38.1% qoq respectively, no thanks to Edible oil products segment in which revenue and PBT were down 28.1% qoq and 38.8% qoq respectively. Performance of Edible oil products segment was dented by lower olein prices as well as lower exports of FCLs. Meanwhile, PBT margin was compressed by -0.3ppts due to lower products demand.

• …as well as YoY. CIH’s YoY revenue and PBT also plunged 27.4% yoy and 13.6% yoy respectively given lower olein prices and lower exports of FCLs. In conjunction with that, Edible oil products segment contracted 27.8% yoy while PBT dropped 12.9% yoy.

• On the same note, 12MFY19’s PBT slumped 27.1% in view of lower selling price. Meanwhile, revenue decreased 12.7% yoy to RM2.3b.

• Dividend declared. The Group has proposed a single tier final dividend of 8sen/share, subject to the shareholders' approval at the forthcoming AGM.

Earnings Outlook/Revision

• We tweak down our earnings forecast for FY20 by 20% to RM20m from RM25m to account for soft selling price. Besides, we take this opportunity to introduce FY21F earnings of RM22m with a growth of 10%.

• Major risks are: 1.) Volatility in palm oil prices; 2.) Rely heavily on ST borrowings for its working capital; 3.) Thin margin and hinged on management expertise to manage its costs efficiently.

Valuation/Recommendation

• Maintain HOLD with a lower target price of RM1.23 (RM1.54 previously) following our earnings cut. Our valuation is now pegged at PER of 10x FY20 EPS of 12.3sen (15.4sen EPS previously). Our valuation is at -1SD below its trailing mean PE as the stock is lack of trading liquidity and the Group now faces lower product selling price.

Source: JF Apex Securities Research - 30 Aug 2019