Quick take: Guan Chong shares hit 2-month high on robust earnings

  • Stock on the Move
  • Monday, 01 Jun 2020

KUALA LUMPUR: Shares of Guan Chong Bhd rose over 3% on Monday after the company reported a decent set of numbers for the first quarter ended March 31.

The world’s fourth-largest cocoa grinder rose 3.06%, or nine sen to RM3.03, its highest in at least two months.

Guan Chong saw its net profit jumped 35.8% to RM72.2mil in the first quarter ended 31 March 2020 from RM53.1mil a year ago.

The company attributed the higher profit to better selling prices of cocoa ingredients and contribution from newly-acquired Germany-based industrial chocolate producer Schokinag Holding GmbH (SCHOKINAG).

Group revenue rose 40.3% in 1Q20 to RM909.4mil from RM648.1mil previously.

Guan Chong also declared first interim dividend of 1.0 sen per share in respect of FY2020, with ex-date on June 16 and payment date on July 10. This brings the total dividend payout for 1Q20 to RM10.1mil or 14.0% of net profit.

RHB Research has maintained a “buy” on Guan Ching with a target price of RM3.35, based on 16x FY21F P/E.

The research house said demand for cocoa products is relatively less affected by the pandemic and Guan Chong is still running with minor disruptions during the Movement Control Order (MCO). Its new venture into the Ivory Coast and Europe would be the next future earnings driver on top of a sustainable earnings base.

“Guan Chong’s 1Q20 core earnings of RM54.6mil (+11% YoY, 65% QoQ) came within our and street expectations, accounting for 27% and 24% of full-year forecasts,” it said.

RHB noted that it has stripped the one-off RM28mil disposal gain of the Fuji Oil Global Chocolate equity stake.

The higher revenue (+40% YoY, 14% QoQ) was attributed to the inclusion of the SCHOKINAG contribution and increased average selling price due to higher cocoa bean prices.
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