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Author: loginvest   |   Latest post: Wed, 14 Oct 2020, 8:41 AM

 

Cocoaland Holdings Bhd 1Q FY 2020 Update Report (HOLD)

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UPDATE REPORT

Compared to other snack food players, Cocoaland sales have held up reasonably well. YTD 1Q20 vs YTD 1Q19 sales are down 6.9%, however profits fell 39.1% over the same period. Economic conditions in Malaysia and around the region continue to deteriorate. YTD 1Q20 export sales now account for 54.3% of total sales vs 57.6% during the same period last year. Local sales have stayed flat over the last four quarters, however export sales have turned sharply lower. Also, margins are lower. Looking ahead, Cocoaland will fare better than many players, though the likelihood of high growth in sales and profits is not high.

INVESTMENT RISKS

Risks to our recommendation and target price include: i) rising trends in material costs, ii) an increase in the general level of interest rates, iii) an increase in the USDMYR exchange rate, and iv) a sharp slowdown in the general level of economic activity in Malaysia or in the economies of the company’s major ‘own brand’ export markets - China/HK and the Middle East.

RECOMMENDATION

We maintain our HOLD recommendation on Cocoaland Holdings Bhd whilst decreasing our fair value to MYR 2.04. It is possible that the share price will surprise on the upside; sales growth may accelerate more quickly than we expect. Cocoaland has very little debt on the balance sheet as well as plenty of cash. Export sales continue to soften in Eastern Asia. The top three overseas market regions remain Eastern Asia, Southeast Asia and Middle East. Should global economic conditions continue to deteriorate, value investors will want to collect at levels below MYR 1.70. The shares are currently standing on a dividend yield above 3.0%.

COMPANY PROFILE

Cocoaland Holdings Bhd is ranked approximately in the middle of the thirty listed companies in the Malaysian snack food industry. The company is one of the few home grown Malaysian consumer firms that have successfully penetrated regional markets. Cocoaland Holding’s predecessor company, MFESB, was formed in 1980. This company and others were consolidated and converted to a public limited company in 2000 under the name Cocoaland Holdings Bhd, prior to listing in 2005. Cocoaland has been quite successful with its fruit gummy line, which remains an affordable small luxury snack in these difficult economic times.

Source: Wilson & York Securities Research - 27 May 2020

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Labels: COCOLND

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Chart Stock Name Last Change Volume 
COCOLND 1.88 -0.02 (1.05%) 38,400 

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