CIHLDG ... Feb11

CIMB Research Report Results highlights
• In line; maintain BUY. CI Holdings’ (CIH) 2QFY6/11 net profit of RM11.3m took 1H bottomline to RM23.1m, which accounted for 54% of our full-year forecast and 53% of consensus estimate. We consider it to be broadly in line with expectations as 4Q is expected to be a slow quarter due to the absence of major festivities. Also not surprising is the interim DPS of 5 sen, higher than 1H10’s 4 sen. We maintain our EPS forecasts and target price of RM5.15, pegged to an unchanged target market P/E of 14.5x. CIH remains a BUY and our top F&B pick, underpinned by the potential catalysts of 1) increasingly marketable product line, and 3) M&A. We view the recent share price weakness as a buying opportunity.

• 43% net profit growth yoy. 2Q11 net profit jumped 43% yoy, aided mostly by new capacity and an aggressive distribution drive. The new RM45m production line for non-carbonated drinks in Bangi started its operations in Sep 10 as scheduled. Tropicana Twister blackcurrant, which was unveiled in Dec 10, is
produced at the new facility. The extra capacity has also allowed the production of Lipton and Gatorade to be progressively taken back from contract packers to Bangi. Another major growth factor is a wider retail reach. As at Jun 10, CIH’s beverages reached 42,000 outlets, an improvement on 36,595 outlets as at Jun
09. Fast-food outlets, hypermarkets and convenience stores make up CIH’s major accounts. The company plans to expand its distribution outlets to 45,000 by Jun 11.

• More fizz from non-carbonated drinks. The non-carbonated beverages led the double-digit yoy growth, with Tropicana staying as the bestseller. From a 20:80 sales split between non-carbonated and carbonated portfolios a few years ago, non-carbonated drinks made up about 40% of 2Q11 revenue, thanks to the
popularity of Tropicana. With the start of the new production line in Sep 10, CIH aims for a 50:50 sales contribution between non-carbonated and carbonated drinks over the next few years.