Cocoaland Holdings (Cocoaland) posted a 4Q net profit of RM9mil,bringing earnings for the full year to an impressive RM19mil. 

It outperformed our forecast by 17%, but only made up 78% ofconsensus estimates. We deem the results to be ahead of our expectations, withthe positive variance coming from a stronger-than-expected 4QFY11.

Management declared a (single-tier, tax-exempt) second interimdividend of 3 sen/share for the quarter, bringing total dividends to 5.5sen/share. This is 1 sen higher than that declared in the previous year. 

Cocoaland reported a stellar set of 4Q results. Notwithstandingsome seasonality in the final quarter, turnover was up 29% QoQ mainly on theback of higher demand for the group's core fruit gummies, higher utilisationrate of its PET beverage lines as well as a bettermargin product mix.

Net profit, which tripled to RM10mil from a mere RM3mil in thepreceding quarter, was also boosted by margin gains from lower costs of rawmaterials, namely sugar. As an indication, raw sugar price for 2HFY11 fell 20%from its peak in June 2011. Consequently, costs of goods sold as a percentageof revenue fell 10ppts QoQ in 4Q. 

Cocoaland's FY11 net profit leapt to RM19mil (YoY: 96%) onback of a 26% YoY rise in turnover. The improved performance was largely due torobust sales volume in 4Q, upward revision in ASPs and lower costs of rawmaterials, which more than offset the negative effects of a weak US dollarexchange rate used for the group's exports overseas. All in, we have trimmedour FY12F-13F earnings forecasts by 16%-19%, taking into account our latestutilisation rates and margin assumptions. Earnings growth moving forward iswell underpinned by new production facilities for fruit gummies and hardcandies scheduled to be operational by end-2012, as well as higher utilisationrates of its PET beverage lines from better off-takes by associate Fraser &Neave Holdings (FNH Mk Equity, Hold) and other MNCs.

We maintain our BUYrecommendation on Cocoaland with a slightly higher fair value of RM2.75/share (RM2.45/share previously) as weroll forward our valuation base to FY13F to better capture the group's earningspotential. We continue to peg FY13F earnings to a fair PE of 15x, or at a 15%discount to F&N's implied target PE of 18x.