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1) Current market price undervalued relative to peers

CIH historically has traded at PE ratios of ~10 while its listed peers F&NCC and YHS trade in a historic PE range of 16-18.

Low trading volumes are attributed to undervaluation of the shares. However, at more reasonable valuations, in line with our peers, we suspect that CIH shares will be more actively traded.

2) Strong top line and bottom line growth prospects

The group's core subsidiary, Permanis, will continue to focus on double digit top line growth from a variety of sources; -

  • Non-Carbonated - Significantly in the rapidly growing non-carbonated industry through growth in products such as Lipton (Tea), Tropicana (Juice), Boss (Coffee), Chill (Asian Drinks) via its new state of the art 'hot fill' production facility commissioned in March 2008.
  • Carbonated Soft Drinks - Grow Permanis's CSD base business industry by improving share of its existing portfolio of strong brands like Pepsi, 7Up, Merinda.
  • Isotonic drinks: Continue to grow share within this large and rapidly growing industry through its portfolio of isotonics, namely, 7Up Revive, Gatorade and Excel.
  • Water: Continue to grow share within this large and rapidly growing industry through its well know brands Bleu and Shot.

In addition, Permanis also aims to proactively offer new beverage products tailored to the evolving customer needs.

Bottom line growth rates are expected to significantly exceed top line growth as economies of scale in overheads are realised.

3) Successfully implemented turnaround

CIH has successful implemented a successful group wide restructuring exercise in its wholly owned subsidiary Permanis during FY 2005/2006 which included a revamp and further investment in its distribution as well as a rightsizing in additional to other operational optimization exercises. This has helped the group propel a consistent and strong improvement in both top line and bottom line results since 2005/06.

Building on the success of the successfully implemented turnaround, the management continues to focus on continued improvement in all areas of the business.