Guan Chong Bhd's outlook for end 2024 is expected to be robust on high cocoa butter average selling prices (ASP), coupled with expansion of production capacity following the company's acquisition of Transcao Côte d'Ivoire, according to RHB Investment Bank Bhd (RHB Research).
Asia's leading grinder reported record high nine-month1 core earnings of RM242 million that still missed expection slightly due to higher-than-expected interest costs, according to RHB Research. The record high year-to-date (YTD, up to September) revenue of RM7.1 billion reflected a 99.2% YoY growth. Interest expenses increased by 109% YoY to RM195 million against forecast of RM167 million. Nevertheless, a strong close to 2024 is expected.
Despite the increases in working capital, the healthy YoY earnings growth was buoyed by increases in sales volumes for cocoa solids and higher ASP. An interim dividend of 1 sen/share was declared, with ex-date set on Dec 11.
RHB Investment Bank Bhd (RHB Research) has maintained its BUY rating for Guan Chong and has revised upward the target price to RM6.22 from RM5.10, with a premium more than 100% based on Guan Chong's market valuation.
The downside risk factors include sharp raw material price fluctuations, weakening cocoa demand, a softening ringgit-to-US dollar exchange rate, and counter-party risk.
As at 11:54am Nov 27, Guan Chong Bhd's shares traded at RM3.02, up 21 sen from its previous closing price of RM2.81. (Stock updates from Bursa Malaysia)
The 2024 third quarter core profit increased 146.1% YoY and 24.4% QoQ to RM83.4 million – on the back of stellar revenue growth of RM2.9 billion which expanded 132% YoY and 33.9% QoQ. This is despite the efficiency loss and higher input costs on lower production tonnage (-6k tonne QoQ) on delays in beans delivery amid port congestion issues. EBITDA2 yield (per tonne) expanded to RM2,298 from RM923 recorded in the third quarter of 2023, while yield per tonne for the second quarter of 2024 amounted to RM1,545.
- January to September for financial year ending 31 December 2024. ︎
- EBITDA: Earnings Before Interest, Tax, Depreciation/Amortization ︎
