RESULTS REPORT
INVESTMENT RISKS
RECOMMENDATION
ANNUAL RESULTS AND METRICS (MYR mn) Major Shareholders (%)
Leverage Success Sdn Bhd 38.0
Fraser & Neave Holdings Bhd 27.2
Liew Fook Meng 2.0
YTD 1Q FY15 revenue increased 14.3% vs YTD 1Q FY14, led by rising exports. YTD 1Q FY15 net profits increased more than 100% vs YTD 1Q FY14. YTD 1Q FY15 operating margins came in at 15.7% vs 7.9% in YTD 1Q 2014. We expect operating margins of 11-14% to prevail over the next several quarters. Cocoaland continues to open new markets and is making very good progress in China/HK and the Middle East. 2014 saw a new sales record and 2015 is on track to set another sales record. Despite sluggish economic condtions in many of Cocoaland’s export markets, sales growth rates are likley to range between 10-12% p.a.
Risks to our recommendation and target price include: i) rising trends in material costs, ii) an increase in the general level of interest rates, and iii) 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.
We maintain our BUY recommendation on Cocoaland Holdings Bhd, and raise our fair value estimate to MYR 2.68. It is possible that the share price will surprise on the upside; sales growth and capacity utilisation may accelerate more quickly than we expect. Cocoaland has very little debt on the balance sheet as well as plenty of cash.
Cocoaland has a clean balance sheet and a proven record of growing export sales (see page 5). Exports are likely to account for 64% or more of total revenue by end 2015. In terms of ‘own brand’ China/HK remains in the top spot as the company’s largest export market, followed by Indonesia and the Middle East in importance. Management has been very diligent in developing new markets that is more than compensating for OEM beverage business lost in the Thai market in 2014.
Cocoaland Holdings Bhd is ranked approximately in the middle of the thirty listed companies in the Malaysian snack food industry. The com-pany is one of the few home grown Malaysian consumer firms that have successfully penetrated regional markets. Cocoaland Holding’s pred-ecessor 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. FTSE-BURSA INDEX MEMBERSHIP
REPORT INDEX
COMPANY PROFILE
SHARE PRICE LAST 12 MONTHS (MYR)
Industry Group Food
Industry Sub Group Food-Misc/Diversified
FBMKLCI FBM70 FBMEMAS FBMHIJRAH
No No Yes No FY Dec 2013 2014 2015F 2016F Revenue 254.4 260.8 297.8 322.4 Revenue g (%) 14.0 2.5 14.2 8.3 Net Profit 22.1 21.9 30.5 31.5 Net Profit g (%) 3.9 -0.6 39.3 3.2 Dividends 10.7 11.2 10.7 10.7 Ow ners' Equity 207.6 218.3 238.2 259.0 Total Liabilities 44.5 43.3 48.8 51.8 Debt/Equity (%) 21.4 19.8 20.5 20.0 EPS (sen) 12.8 12.8 17.8 18.4 P-S (x) 1.4 1.0 1.2 1.1 P-E (x) 16.7 12.0 11.6 11.2 P-BV (x) 1.8 1.2 1.5 1.4 ROE % 10.6 10.0 12.8 12.2
Recom m endation BUY
Target Price (MYR) 2.68
Current Price (MYR) 2.06
Ke y Com pany Statistics
Bloomberg Ticker COLA MK
Bursa Stock Code 7205
Issued Capital (mn shares) 171.6 Market Capitalisation (MYR mn) 353.5
52 w eek High (MY R) 2.20
52 w eek Low (MYR) 1.40
Average Volume (3 month) ‘000 206.6
1 Yr Return (%) -0.1 Reporting Quarter 1Q-2015 $ 1 .1 0 $ 1 .5 0 $ 1 .9 0 $ 2 .3 0 $ 2 .7 0 $ 3 .1 0 5 -1 4 6 -1 4 7 -1 4 8 -1 4 9 -1 4 1 0 -1 4 1 1 -1 4 1 2 -1 4 1 -1 5 2 -1 5 3 -1 5 4 -1 5 5 -1 5 S h a re P ri c e ( M Y R ) Contents Page
Recommendation, Company Profile, Metrics 1 Quarterly Results, Competitor's Metrics 2 P&L, Balance Sheet, Per Share Data 3 10 Yr Sales, Net Profit, 10 Yr Price, P-BV charts 4 Recent Co. New s, Recommendation Record 5 Analyst's Disclosure, Contact Details 6
QUARTERLY RESULTS TABLE (All figures in MYR mn unless otherwise indicated)
COMPETITOR’S METRICS (All figures in MYR mn unless otherwise indicated)
*Consensus data used for peers where available
FY Dec 1Q-15 1Q-14 Q-o-Q YTD YTD Y-o-Y
%chg FY15 FY14 %chg Revenue 67.7 59.3 14.3 67.7 59.3 14.3 Operating Profit 10.6 4.7 >100 10.6 4.7 >100 Other Income 1.0 0.5 >100 1.0 0.8 26.2 Share of Associates 0.0 0.0 na 0.0 0.0 na Depreciation/Amort'n -2.6 -2.6 -2.2 -2.6 -2.6 -2.2 Finance Costs 0.0 0.0 na 0.0 0.0 na
Pre Tax Profit 10.6 4.7 >100 10.6 4.7 >100
Tax -2.6 -1.2 na -2.6 -1.2 na
Minority Interest 0.0 0.0 na 0.0 0.0 na
Net Profit to S'holders 8.0 3.4 >100 8.0 3.4 >100
Dividends 0.0 0.0 na 0.0 0.0 na EPS (sen) 4.7 2.0 >100 4.7 2.0 134.7 DPS (sen) 0.0 0.0 na 0.0 0.0 na Operating Margin (%) 15.7 7.9 99.0 15.7 7.9 99.0 Net Margin (%) 11.8 5.8 >100 11.8 5.8 105.3 Tax Rates (%) 24.5 26.8 -8.6 24.5 26.8 -8.6 NTA/share (RM) 1.32 1.23 7.3 Com m ents
Revenue increased 14.3% YTD 1Q FY15 vs. YTD 1Q FY13 driven by strong grow th in exports to China and Indonesia, the f irm's tw o largest markets.
Net Profit increased more than 100% YTD 1Q FY15 vs. 1Q YTD FY 14. The co mpany continues to broaden its export markets despite challenging trading conditions. Operating margins continue to improve and are likley to stay above 10% next 2 qtrs. Tax rates still above statutory rates, but not by much. C u r r e n t Y e a r C o c o a la n d Ho ld in g s Bh d A p o llo Fo o d Ho ld in g s Bh d L o n d o n Bis c u it s Bh d En d in g * De c - 1 5 A p r - 1 5 J u n - 1 5 Re v e n u e 2 9 7 .8 2 1 3 .4 3 5 5 .3 Ne t Pr o f it 3 0 .5 2 5 .0 1 7 .1 O w n e r s ' Eq u ity 2 3 8 .2 2 4 8 .7 3 6 0 .8 Div id e n d s 1 0 .7 2 0 .0 1 .4 Ma r ke t Ca p 3 5 3 .5 3 8 3 .2 1 1 5 .7 P- S ( x ) 1 .2 1 .8 0 .3 P- E ( x ) 1 1 .6 1 5 .3 6 .8 P- B V ( x ) 1 .5 1 .5 0 .3 Div Y ie ld ( % ) 3 .0 5 .2 1 .2 Ne t Ma r g in s ( % ) 1 0 .3 1 1 .7 4 .8 RO E ( % ) 1 2 .8 1 0 .1 4 .8 Pa y o u t Ra tio ( % ) 3 5 .1 8 0 .0 8 .2 S a le s G r o w th ( % ) 1 4 .2 - 3 .2 - 1 .3 To ta l De b t/Eq u ity ( % ) 1 1 .7 1 0 .2 8 8 .1
PROFIT & LOSS (All figures in MYR mn unless otherwise indicated)
BALANCE SHEET (All figures in MYR mn unless otherwise indicated)
PER SHARE DATA (All figures in sen unless otherwise indicated)
FY Dec 2013 2014 2015F 2016F Revenue 254.4 260.8 297.8 322.4 Operating Profit 29.3 30.6 40.6 42.0 Other Income 3.7 2.5 2.2 1.6 Share of Associates 0.0 0.0 0.0 0.0 Depreciation/Amortization -11.8 -10.8 -11.9 -12.4 Finance Costs 0.0 0.0 0.0 0.0
Pre Tax Profit 29.3 30.6 40.6 42.0
Tax -7.2 -8.7 -10.1 -10.5
Minority Interest 0.0 0.0 0.0 0.0
Net Profit to Shareholders 22.1 21.9 30.5 31.5
Operating Margin (%) 11.5 11.8 13.6 13.0
PBT Margin (%) 11.5 11.8 13.6 13.0
Net Margin (%) 8.7 8.4 10.3 9.8
Effective Tax Rate (%) 24.7 28.5 24.9 25.0
FY Dec 2013 2014 2015F 2016F Total Assets 252.1 261.6 287.0 310.8 Fixed Assets 146.9 139.1 142.9 150.9 Current Assets 105.1 122.5 144.2 160.0 Other LT Assets 0.0 0.0 0.0 0.0 Current Liabilities 39.4 35.7 40.8 43.3 LT Liabilities 5.1 7.6 8.0 8.5 Total Liabilities 44.5 43.3 48.8 51.8 Share Capital 85.8 85.8 85.8 85.8 Minority Interest 0.0 0.0 0.0 0.0 Ow ners' Equity 207.6 218.3 238.2 259.0 Total Equity 207.6 218.3 238.2 259.0
Total Liabilities & Equity 252.1 261.6 287.0 310.8
FY Dec 2013 2014 2015F 2016F Revenue 148.3 152.0 173.6 187.9 Cash Flow 19.7 19.1 24.7 25.6 Earnings 12.8 12.8 17.8 18.4 Dividends 6.3 6.5 6.3 6.3 Book Value 121.0 127.2 138.8 150.9 Payout (%) 48.6 50.9 35.1 34.0 P-S (x) 1.4 1.0 1.2 1.1 P-CF (x) 10.8 8.0 8.3 8.1 P-E (x) 16.7 12.0 11.6 11.2 P-BV (x) 1.8 1.2 1.5 1.4 Dividend Yield (%) 2.9 4.2 3.0 3.0 ROE (%) 10.6 10.0 12.8 12.2 Total Debt/Equity (%) 21.4 19.8 20.5 20.0
REVENUE - QUARTERLY LAST 10 YEARS (MYR mn) NET PROFIT - Q’TERLY LAST 10 YRS (MYR mn)
SHARE PRICE - MONTHLY LAST 10 YEARS (MYR) P-BV (X) - MONTHLY LAST 10 YEARS
0 .0 2 0 .0 4 0 .0 6 0 .0 8 0 .0 9 -0 4 3 -0 5 9 -0 5 3 -0 6 9 -0 6 3 -0 7 9 -0 7 3 -0 8 9 -0 8 3 -0 9 9 -0 9 3 -1 0 9 -1 0 3 -1 1 9 -1 1 3 -1 2 9 -1 2 3 -1 3 9 -1 3 3 -1 4 9 -1 4 3 -1 5 T u rn o v e r M Y R (m n ) 0 .0 2 .0 4 .0 6 .0 8 .0 1 0 .0 1 2 .0 9 -0 4 3 -0 5 9 -0 5 3 -0 6 9 -0 6 3 -0 7 9 -0 7 3 -0 8 9 -0 8 3 -0 9 9 -0 9 3 -1 0 9 -1 0 3 -1 1 9 -1 1 3 -1 2 9 -1 2 3 -1 3 9 -1 3 3 -1 4 9 -1 4 3 -1 5 N e t P ro fi ts M Y R (m n ) 0 .2 0 0 .7 0 1 .2 0 1 .7 0 2 .2 0 2 .7 0 3 .2 0 3 .7 0 1 -0 5 7 -0 5 1 -0 6 7 -0 6 1 -0 7 7 -0 7 1 -0 8 7 -0 8 1 -0 9 7 -0 9 1 -1 0 7 -1 0 1 -1 1 7 -1 1 1 -1 2 7 -1 2 1 -1 3 7 -1 3 1 -1 4 7 -1 4 1 -1 5 S h a re P ri c e ( M Y R ) 0 .0 1 .0 2 .0 3 .0 4 .0 5 .0 1 -0 5 7 -0 5 1 -0 6 7 -0 6 1 -0 7 7 -0 7 1 -0 8 7 -0 8 1 -0 9 7 -0 9 1 -1 0 7 -1 0 1 -1 1 7 -1 1 1 -1 2 7 -1 2 1 -1 3 7 -1 3 1 -1 4 7 -1 4 1 -1 5 P -B V ( X )
ANALYST’S RECOMMENDATION RECORD
Cocoaland has made impressive new additions to its production capacity, all funded from internally generated funds. Over the next several quarters the company will spend another MYR 5 mn on packaging machines. The company’s new production facilities for Hard Candy commenced commercial operation in 2Q 2012, whilst new Fruit Gummy facilities commenced production in 2Q 2013. 1Q 2015 capacity utilization for 2 Hard Candy and 3 Gummy lines are currently running at 15% and 55% respectively, up from 10% and 45% in 3Q 2014.
Meanwhile, the company has been building up marketing networks in Indonesia and China and the Middle East. In 2008, Cocoaland set up its first sales subsidiary in China. The company registered its own distribution company in Indonesia in 1Q 2013 to improve sales volumes and margins in Indonesia - one of the largest and fastest growing markets for candy in the world. In addition, Cocoaland has been making impressive progress selling its ‘own brand’ products in China/HK and the Middle East. YTD 1Q 2015 own brand sales accounted for about 54% of export sales, up from 45% end of 2013. Cocoaland’s management has made commendable progress in growing new markets and is on track to reach new highs in revenue, whilst maintaining very respectable margins.
Looking ahead, we expect sales growth rates to range between 8-10% pa as the outlook for growth in Asia and elsewhere is softening. Nonetheless, Cocoaland has been fairly successful in growing its overseas sales as shown by the table below. This is quite encouraging for the medium and long term as the company’s export market is potentially many times the size of its domestic market. There are very few ‘home grown’ companies in Malaysia that achieved the record of consistent export success shown below.
RECENT COMPANY NEWS
MYR (m n) 2010 2011 2012 2013 2014 2015F 2016F FY15/FY11 CAGR Export Sales 68.5 86.4 125.1 155.2 160.6 194.4 221.5 17.6% Total Sales 142.3 174.0 223.2 254.4 260.6 298.4 327.5 11.4% % Exports 48.1% 49.7% 56.0% 61.0% 61.6% 65.1% 67.6% Export Grow th % 10.5% 26.2% 44.8% 24.0% 3.5% 21.1% 13.9%
Total Sales Grow th % 6.8% 22.3% 28.3% 14.0% 2.4% 14.5% 9.7%
Ticker Date Recommendation FairValue
Price At Date of Recommendation
% Price Change Since Prior Recommendation
COLA MK Equity 24-Feb-11 BUY 2.60 2.28
COLA MK Equity 13-Apr-11 BUY 2.60 2.23 -2.2%
COLA MK Equity 23-May-11 BUY 2.60 2.10 -5.8%
COLA MK Equity 25-Aug-11 BUY 2.60 1.96 -6.7%
COLA MK Equity 22-Nov-11 BUY 2.60 2.00 2.0%
COLA MK Equity 27-Feb-12 BUY 2.98 2.39 19.5%
COLA MK Equity 28-May-12 BUY 2.68 2.06 -13.8%
COLA MK Equity 27-Aug-12 BUY 2.68 2.16 4.9%
COLA MK Equity 26-Nov-12 BUY 2.68 2.36 9.3%
COLA MK Equity 27-Feb-13 HOLD 2.68 2.07 -12.3%
COLA MK Equity 28-May-13 HOLD 2.68 2.45 18.4%
COLA MK Equity 26-Aug-13 HOLD 2.28 2.25 -8.2%
COLA MK Equity 25-Nov-13 BUY 2.38 2.16 -4.0%
COLA MK Equity 27-Feb-14 BUY 2.48 2.09 -3.2%
COLA MK Equity 26-May-14 HOLD 2.18 2.20 5.3%
COLA MK Equity 25-Aug-14 BUY 2.18 1.83 -16.8%
COLA MK Equity 24-Nov-14 BUY 1.98 1.71 -6.6%
COLA MK Equity 26-Feb-15 BUY 2.28 1.80 5.3%
COLA MK Equity 25-May-15 BUY 2.68 2.06 14.4%
ANALYST’S DISCLOSURE
BUY: Share price may exceed 10% over the next 12 months
TRADING BUY: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain HOLD: Share price may fall within the range of +/- 10% over the next 12 months
TAKE PROFIT: Target price has been attained. Look to accumulate at lower levels SELL: Share price may fall by more than 10% over the next 12 months
NOT RATED (NR): Stock is not within regular research coverage
All research is based on materials compiled from data considered to be reliable at the time of writing. However, information and opinions expressed are subject to change at short notice, and no part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise.
We do not accept any liability directly or indirectly that may arise from investment decision-making based on this report. The company, its directors, officers, employees and/or connected persons may periodically hold an interest and/or underwriting commitments in the secu-rities mentioned.
This report has been prepared Wilson & York Global Advisers Sdn Bhd for purposes of CMDF-Bursa Research Scheme ("CBRS") administered by Bursa Malaysia Berhad and has been compensated to undertake the scheme. Wilson & York Global Advisers Sdn Bhd has produced this report independent of any influence from CBRS or the subject company. For more information about CBRS and other research reports, please visit Bursa Malaysia's website at: http://www.bursamalaysia.com/website/bm/listed_companies/ cmdf_bursa_research_scheme/
All Rights Reserved. No part of this publication may be used or re-produced without expressed permission from Wilson & York Global Advisers Sdn Bhd.
J Charles Wilson Head of Research
Wilson & York Global Advisers Sdn Bhd Suite B-11-3A, Level 11, Block B, Plaza Mont’ Kiara 2, Jalan Kiara, Mont’ Kiara
50480 Kuala Lumpur Malaysia Tel: +603 6203 2280 Fax: +603 6203 2281 E-mail [email protected] Website: www.wygainvestments.com QUESTIONS?
CONTACT THE INVESTMENT ADVISER: CONTACT THE COMPANY:
Cocoaland Holdings Berhad
Lot 100, Rawang Integrated Industrial Park 48000 Rawang
Selangor Darul Ehsan Malaysia
Tel: +603 6091 3131 Fax: +603 6091 5131
