B1. Review of performance The Group’s revenue of RM1,100.5 million for the current quarter ended 30 September 2022 is higher than the revenue in the previous corresponding quarter ended 30 September 2021 of RM998.1 million. The increase of 10.3% in turnover is mainly due to improved selling price of cocoa solids and higher sales volume of cocoa butter. B2. Comment on material change in profit before tax The Group made a profit before tax for the quarter 30 September 2022 of RM37.5 million as compared with the profit before tax of RM41.7 million in the preceding year corresponding quarter ended 30 September 2021. This is mainly due to mark to market currency loss as a result of weakening of MYR against USD and higher finance cost due to higher interest rate during current quarter ended 30 September 2022. The reduction in profit is also partially contributed by higher energy cost in Germany. B3. Commentary of prospects Energy cost in Q4 2022 is currently on a declining trend in the Western countries, especially in Germany. Besides that, global freight rates have also lowered down and are close to normalizing. Chocolate consumption still remains positive despite current high inflationary environment and chocolate demand is expected to maintain stable growth. We remain optimistic of our prospect as on top of the above indications, we continued to book in increasing forward sales of cocoa ingredients for next year. In addition, our Ivory Coast factory has started commissioning and is expected to run smoothly next year, anticipating additional contribution to our profit in FY2023. With the higher interest rate, we will carefully look into our financing structure for investment and monitor our inventory level closely, while working on mitigating the risk of currency exposure. The Group will remain its focus on the core ingredient processing as well as expansion of the market of better margin industrial chocolate and the optimization of production according to market conditions
Thanks for this video. Guan Chong is not an easy business to run. From the video you can see how the first generations were affected. Today, it has grown big; yet not without its challenges. Look at the amount of debt it has to use to grow this business. The biggest is to hedge the cocoa inventories. Guan Chong has grown its market share as during the 2008 crisis, many European companies in similar business have given or scaled down.
In the video, Brandon Tay mentioned a particular company a few times. I think this company mentioned by Brandon Tay is definitely in a business with very strong economic moat; and probably will turn out to be a better business to invest into for the long term.
A company with poor economics, managed by the best manager, in the end, the company turns out the winner. Also it is better to own a great company at fair price than to own a fair company at great price.
Guan Chong may offer short term trading opportunities at times, but I think I will not be a long term investor in this business (just like many members of his very big family).
Just my opinion.
KEY STOCK DATA P/E Ratio (TTM) 14.59(12/30/22) EPS (TTM) RM0.16 Market Cap RM2.82 B Shares Outstanding 1.17 B Public Float 397.05 M Yield 2.29%(12/30/22)
Current Price (7/1/2011): 2.49 2009 Sales 642,649,516 Employees: 180 Market Cap: 597,600,000 Shares Outstanding: 240,000,000 Closely Held Shares: 167,840,000
Market cap of Guan Chong was RM 597,6 million in 2011. Today its market cap is RM2.82 B.
Average Growth Rates Guan Chong Bhd Past Five Years Ending 12/31/2021 (Fiscal Year) Revenue +16.53% Net Income +14.01% Earnings Per Share +9.76% Capital Spending +50.60% Gross Margin +11.45% Cash Flow +22.68%
B2. Comment on material change in profit before tax The Group made a profit before tax for the quarter 31 December 2022 of RM30.6 million as compared with the profit before tax of RM70.2 million in the preceding year corresponding quarter ended 31 December 2021. This is mainly due to reduced margin and higher finance cost due to higher interest rate during current quarter ended 31 December 2022.
The currency exposure profile of borrowings is as follows: Group Company 2022 RM 2021 RM 2022 RM 2021 RM United States Dollar 461,690,105 548,455,935 - - Ringgit Malaysia 301,370,337 301,781,767 300,000,000 300,000,000 British Pound 227,053,801 350,590,916 - - Euro 170,640,133 91,460,950 - - 1,160,754,376 1,292,289,568 300,000,000 300,000,000
FY23 to be a breakout year. The Ivory Coast plant is expected to reach near-full utilisation by end 1Q23, and could potentially generate MYR50- 90m profit pa at an optimal production level, with a 5-year tax free status. Meanwhile, the declining trend of energy costs and higher ASPs are expected to swing Schokinag’s operations back into the black (following a minor loss in FY22). In the UK, an annual capacity of 16k tonnes of industrial chocolate will be commissioned by mid-2023 and start contributing in 2H23.
Still optimistic. With 70k metric tonne from the Ivory Coast plant (5-year tax free status) expected in 2H and a full-year contribution in FY24F, we remain optimistic on GUAN’s prospects. The Schokinag operations should continue to show strong performance from lower input costs and higher ASPs. The 16k tonne annual capacity of industrial chocolate plant in United Kingdom is also expected to start production in 2H23 as part of GUAN’s strategy to diversify into the higher-margin industrial chocolate marke
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....