InsiderAsia’s Stock Pick: Cocoaland Holdings

by **Cals** Thu 30 Oct 2014, 01:40

InsiderAsia’s Stock Pick: Cocoaland Holdings

Cocoaland Holdings Berhad
MALAYSIAN snack and confectionary companies have carved a name for themselves, catering to the region’s large lower and middle income classes. With cheaper prices, established brands and product innovation, they hold a competitive advantage against more expensive imports from the US and Europe, and have successfully penetrated the Malaysian and regional markets.
Cocoaland is one such successful company. It is involved in the manufacturing of processed and preserved food and fruits, chocolates, hard candy, fruit gummy, cookies, wafer, and beverages. Its notable brands include Lot100, Cocopie, Mum’s Bake, Koko Jelly and Fruit 10.
The company has carved a niche as a leader in the fruit gummy market, which accounts for 35% of revenue. Cocoaland has also successfully penetrated the regional market, with exports accounting for 61% of sales, mainly to China, Vietnam and Indonesia.
Cocoaland’s revenue has steadily increased from RM142.3 million in 2010 to RM254.4 million in 2013, while net profit rose from RM9.8 million to RM22 million. In 1H2014, revenue declined 2.5% to RM124.3 million, resulting in a 5.4% drop in net profit to RM7.9 million. This was due to lower sales from its beverage contract manufacturing division and higher advertising costs. Going forward, the recent major capacity expansion in its fruit gummy division will underpin growth.
At RM1.59, Cocoaland is trading at a slight premium of 35 sen or 28.2% to its book value of RM1.24 with a trailing 12-month P/E of 12.6 times. These valuations are inexpensive for a consumer company with strong, growing brands. Net cash stood at RM23.6 million, or 13.7 sen per share, as at 30 June 2014. The company paid dividends of 6.5 sen in 2013, translating to a yield of 4.1%.
Its major shareholders are the founding Liew family with 38.04% and Fraser & Neave Holdings ([You must be registered and logged in to see this image.] Financial Dashboard) with a 27.19% stake.
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This article first appeared in The Edge Financial Daily, on October 29, 2014.