AFTER C.I. Holdings Bhd disposed of its soft drink bottling subsidiary Permanis Sdn Bhd to Asahi Group Holdings Ltd for RM820 million in October 2011, it lost the attention of the market. Most days, its daily trading volume was at the sub 500,000 share mark.  

But late last month, the stock saw a sudden surge in interest amidst talk of a possible corporate exercise at the company. C.I.’s share price jumped 21% to RM1.38 on Feb 26 with some 1.25 million shares traded. The stock continued to climb on the next two days.

When met by The Edge last Thursday, C.I.’s largest shareholder Datuk Johari Abdul Ghani confirms that the group is looking to acquire other edible oil packaging and distribution companies to expand capacity at Continental Resources Sdn Bhd — which it had purchased for

RM42 million from Lee Cheang Mei and Fung Heen Choon, co-founders of the company, last April. The group is already in advanced negotiations, he says, without offering any details.

Still, Johari, who is also Titiwangsa MP, is excited to talk about the edible oil packaging business. Though its profit margin is less than 2%, he is confident the business can generate an annual revenue of RM1 billion in two to three years with other new ventures.

The acquisitions will see C.I. double its edible oil exports to about 1,500 containers per month from about 800 now, Johari says.

The acquisitions are aimed at increasing the export markets of C.I.’s subsidiary Continental Resources Sdn Bhd to 90 from about 48 now, he explains. At the moment, domestic sales make up only 5% of Continental Resources’ sales, he adds.

Johari admits though that the packaging and distribution business has a thin profit margin because it is at the bottom of the edible oil industry’s value chain. In 6MFY2015 ended Dec 31, 2014, C.I.’s net profit margin was 1.58% based on its revenue of RM197.7 million.

Johari seems to have an answer to the thin margins. Besides its plan to acquire edible oil packaging and distribution companies, he says the group is also considering a new business in the consumer sector. However, he is tight-lipped about it.

“This (the venture) is going to be big for us. I don’t want to jeopardise the negotiation by commenting on it. Let us sign the deal first and we will talk to you about it,” he says.

“We want to create a bigger company, just like we did with Permanis. When I came to C.I. in 2002, Permanis was the sixth largest bottler in the country. But when we sold it off to Asahi in 2011, it was the second largest.”

To recap, after the disposal, C.I. utilised part of the proceeds to acquire Continental Resources. Following this, there was market talk that C.I. was looking to acquire a building material company to complement its existing business. The rumours died after there was no conclusive deal.

Continental Resources contributed over RM6 million to C.I.’s profit before tax after just eight months of being consolidated into the group’s accounts as at Dec 31, 2014.

In 6MFY2015, C.I.’s net profit skyrocketed to RM3.12 million from RM281,000 in the previous corresponding period.

As at Dec 31, 2014, C.I. had RM9.4 million in cash and cash equivalents, RM10.64 million in deposits placed with financial institutions and RM54.74 million in short-term funds. Bank borrowings stood at RM12.74 million and long-term loans at RM4.83 million.

Johari is confident that expanding C.I.’s edible oil packaging and distribution business and entering into a new venture will help the group achieve total revenue of RM1 billion in two to three years.

Can the group repeat its success with Permanis with Continental Resources? Only time will tell.

This article first appeared in The Edge Malaysia Weekly, on March 16 - 22, 2015.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.