Chin Hin Group (CHG) reported a headline net profit of RM16.6m (+87.2% YoY, +1.2% QoQ), for 4QFY22, with operational income making larger contributions this time as compared to previous quarters. Cumulative FY22 reported net profit of RM97.8m is within estimates at 96% of our full-year expectations which incorporates the Group’s disposal gains. CHG continues to see improvements in its operations, with most of its core businesses continuing to benefit from the transition of the economy into endemicity. While we remain encouraged over CHG’s longer term prospects, underpinned by the integration of its three listed subsidiaries/associates – Chin Hin Group Property (CHGP), Signature International (SIB) and Ajiya, we are ceasing coverage on CHG however, in view of limited re-rating catalysts, with expected positive developments already accounted-for and priced-in. We are also redeploying internal resources to broaden our scope of coverage. Our last call and target price are Neutral and RM2.37. Current forecasts should no longer be relied on as basis for recommendation.

• FY22 result highlights. CHG reported a notable +41.7% YoY jump in revenue to RM1.63bn, largely due to the consolidation of CHGP’s numbers. Operational improvements were also evident in the distribution and autoclaved aerated concrete/precast concrete segments’ revenue contributions rising +25.1% YoY (to RM748.9m) and +17.9% YoY (to RM372.6m) respectively. There was a notable jump in finance costs due to the Group’s funding of its recent acquisitions through borrowings, though this is expected to reduce over time as profit contributions kick in more strongly. Reported net profit of RM97.8m (+223.5% YoY) was aided in large part by disposal gains from its Solarvest shares. Estimated core net profit (excluding disposal gains, impairments) of RM21.9m is still an encouraging +96.9% higher YoY, reflective of operating conditions returning to some form of post-pandemic normalcy.

• Recent developments. Starken AAC’s plant 2 utilization rate remains at an encouraging 58%, with most of its output headed into the Singapore market. CHGP is the busiest of the lot, with two new launches (with total gross development value (GDV) of RM1.32bn) planned this year. CHGP is also planning to launch three new projects in KLCC, Taman Connaught and Jalan Sungai Besi with cumulative GDV of RM2.2bn in 2024. SIB’s orderbook stands at RM626m as at end-December 2022, meanwhile.

Source: PublicInvest Research - 27 Feb 2023