Plantation Sector : News flow for week 17 – 21 July NEUTRAL

STOCK FOCUS OF THE DAY

C.I. Holdings : Export-oriented maker of edible oils                          HOLD

We initiate coverage on C.I. Holdings Bhd (CIH) with a HOLD and fair value of RM2.60/share based on an FY18F PE of 14x. This is slightly below its 1-year average of 15.7x and range of 15-16x for consumer goods companies with a small market capitalization of below RM1bil. The fair value implies an upside of 11% and dividend yield is at 1.7%. The group buys, sells, manufactures and packs various types of edible oils based on refined bleached deodorized (RBD) palm olein. Its sells to around 150 distributors that serve household and industrial (food industry) users.

About 90% of its products are exported with the biggest markets being Africa (45%), the UAE (17%), Asia (12%) and the Middle East (8%). We are projecting an annual net profit growth of between 11% and 30% for the three years from FY18, premised on continued top-line growth and a gradual improvement in gross margins. While the top-line growth of CIH has been commendable, we believe a positive operational cash flow and a lower dependence on debt are important for the long-term sustainability of the group.

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Plantation Sector : News flow for week 17 – 21 July                         NEUTRAL

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