CI Holdings - Still on The Hunt For New Core Biz

CIH’s 1QFY13 results were a disappointment, as revenue grew only 7.7% y-o-y, propped up by higher interest income. However, at the bottomline level, the company slipped into the red due to one-off expenses from its failed bid for the Prai CCGT tender. The group is still searching for a new core business. Maintain SELL with a FV of RM0.60.

Dragged down by one-off expenses from Prai CCGT bid. CIH’s 1QFY13 revenue was 7.7% better y-o-y, but this was largely due to an increase in interest income. Turnover in the tap- and sanitaryware segment grew 1.1% while the investment segment’s revenue more than doubled to RM0.6m due to the low base. However, the company slipped into the red, dragged down by one-off expenses related to its tender bid for the Prai Combined Cycle Gas Fired Power Plant Project (Prai CCGT). Compared with the last quarter, revenue was lower by 2% due to the weaker performance in the tap- and sanitary ware segment. Meanwhile, the pre-tax loss of RM64k for the quarter was attributed to expenses relating to the Prai CCGT tender bid while the pretax loss of RM0.7m in the preceding quarter arose from the cost of a capital repayment exercise back in April.

On the lookout for new business. The group is still searching for a new core business, having failed in its bid to land the Prai CCGT tender. The company still harbours hopes of firming up its new business direction within a year. Note that CI Holdings does not have to follow a timeline to acquire a new business as it is not a PN17 or PN16 company.

Maintain SELL. As the outlook for the existing tap- and sanitary-ware business is challenging due to the slowdown in the property construction sector and there has been no material announcement on a new core business, we advise investors to sell the stock at the current price level. We are not reviewing our earnings forecast pending clarity from the management on the company’s future direction. The stock’s FV stays at RM0.60, based on a 10x FY13 EPS for DOE and the company’s prospective new business. The share price has retraced by >40% since we downgraded the stock to a SELL in April.

Source: OSK