KUALA LUMPUR (Aug 28): Shares of Johor-based Guan Chong Bhd (KL:GCB) rebounded on Wednesday from the previous day's aggressive sell-off that wiped out RM522.2 million.

On Wednesday, the cocoa grinder's stock rose as much as 7.6% to touch an intraday high of RM3.10 before falling back to end at RM2.94, up six sen or 2.08% from the previous close. The stock fell 14% on Tuesday, ending at RM2.88 — its lowest close since May 3 this year.

At Wednesday's closing price, its market capitalisation stood at RM3.45 billion. A total of 12.3 million shares changed hands.

On Tuesday, Guan Chong saw a heavy sell-down of its shares, dropping 14% to close at RM2.88, giving it a market capitalisation of RM3.38 billion. Amid the sell-off, chief executive officer and managing director Brandon Tay Hoe Lian scooped up 200,000 shares, or a 0.017% stake, on the open market for RM577,572, which worked out to RM2.89 apiece. This brought his shareholding in Guan Chong to 4.873%, according to a filing with Bursa Malaysia on Tuesday.

In a note to investors on Wednesday, RHB Research said the sharp sell-down was overdone.

"We reiterate our 'buy' thesis, and try to shed some light on investors’ doubts that may have dampened its share price performance. Guan Chong has delivered robust year-on-year earnings growth in the first half ended June 30, 2024 (1HFY2024), and is set to book record earnings this year.

"The management has guided for a higher combined ratio into 2HFY2024, and an even better ratio into 1HFY2025 (about 50% forward sales covered), underpinned by robust demand and the shortage of beans and grinding on offer," the research firm wrote.

For 1HFY2024, Guan Chong's net profit more than tripled to RM159.03 million from RM51.88 million a year ago, while revenue surged 80.9% to RM4.09 billion from RM2.26 billion in 1HFY2023.

RHB Research has a target price (TP) of RM5.10 for Guan Chong, reflecting an unchanged 15 times price-earnings ratio. The TP indicates a potential upside of 77% from Tuesday’s closing price of RM2.88. Shares of Guan Chong are up 68% year to date.