CI Holdings - Still Without a Core

CIH’s FY12 results were below expectations. Net profit grew to RM658.7m, mainly driven by the RM688.4m one-off gain on disposal from the sale of Permanis last year. Excluding this exceptional gain. Core net profit stood at only at RM2.7m. Meanwhile, the group is still in the lookout for a new core business. In view of the uncertainty over this future business as well as the weak performance of its existing businesses, we maintain a SELL on the stock, with a lower FV of RM0.60.

Not looking good. CIH’s FY12 revenue came in weaker by 6.8% y-o-y due to a slowdown in the construction sector while net profit was high at RM658.7m, thanks to the one-off RM688.4m gain from the disposal of Permanis in Nov 2011. Excluding the exceptional gain, the core net profit only stood at RM2.7m.  On a q-o-q basis, revenue from its continuing operations (DOE+Holdings) was slightly lower. Its net profit plunged by 125%, culminating in a loss of RM0.2m due to increased administrative expenses stemming from office relocation costs and one-off expenses related to the capital repayment exercise completed on April 2012.

The search continues. Currently, the group is still actively seeking opportunities for a new core business and aims to replicate its past success through new investments. CIH has proven its capability in successfully transforming and extensively growing its investee companies. Meanwhile, it is bidding for the Prai CCGT power project as part of a consortium that includes two other companies, namely Teknologi Tenaga Perlis Consortium SB (TTPC) and Daelim Industrial Co Litd (Daelim). This consortium has been shortlisted to participate in the tender process for the project.

Maintain SELL. Given the uncertainty arising from a lack of new core business for the company and the weak numbers from its existing sanitary tapware and investment segments, we are cutting our FY13 forecast by 2.9%. Maintain SELL, with a lower FV of RM0.60, based on a 10x FY13 EPS for DOE and the soon-to-be-acquired new business.

Source: OSK