Monday, August 09, 2010

Review Of Guan Chong's Earnings

One of the hot stocks reported its earnings just now. Of course I was interested.

And of course, mind you, this was a stock that was hot. Yup, so hot it was surging so much that the owners did not know why!


Stop starring! :P

Here's a news clip: Guan Chong does not know why share price surged

Here's the lovely one year stock chart for Guan Chong. Yup, Houston we did have a launching for this stock into orbit. :P

Yes, Twelve months ago this stock was a mere 0.425. Earluer this month, on the 3rd Aug, it hit 1.54! (The stock was around 60 sen in May!!!)

Missed out on a gem?

But the stock was cheap for a reason.

The earnings were really uninspiring.

Here's a copy of a OSK report back in 2008. Look the earnings table end of the report. You can see the lacklustre earnings.

But then something 'changed' recently. The 'earnings' did improve... a lot!

Today, Guan Chong released its 2010 Q2 earnings. Here's an updated summary.

It does look extremely impressive if based just on those numbers, yes?

However, if I add in the loans and receivables, perhaps it's not as impressive, yes?

Some might even say it's justifiable because the company is earning much more...

From the company earnings notes... page 10.

  • The Group’s revenue of RM270.78 million for the current financial period ended 30 June 2010 is higher than the revenue in the previous corresponding financial period ended 30 June 2009 of RM120.89 million. The increase of 123.99% in turnover is mainly due to higher sales volume and market price of cocoa products. The profit before tax for the period ended 30 June 2010 increased substantially to RM25.16 million. This is mainly attributed by higher revenue generated in current quarter, gain from commodity future contracts and net fair value gains on foreign exchange derivatives.


Gain from commodity future contracts?


There's a nice table provided by Guan Chong.



DO you reckon that you missed out on a gem?



Please see this important update also: Update On Guan Chong's Posting


tklaw said...

What an amazing quarterly earnings. I did not notice the company involved in commodity trade. I wish I owned this gem six months ago.

The company has started enjoying fruitful results from hedging since the first quarter. Gain represents 30% of total profit cumulatively. This is probably positive outcome from the ‘HEDGING‘ of cocoa products. I reckon this is a normal course of business to reduce the exposure in cocoa price and not a speculative motive.

Hopefully, the profit is not sufficient enough to lead the management venture into commodity trade business. Good luck!

Moolah said...

The issue is the 'hedging' profits which is rather substantial when compared to its operating profits.

From Guan Chong's own table

Cummulative gain so far this fiscal year.

Gain from forex: 7.299
Unrealised forex gain: 3.029
Realised gains on commodities futures contracts: 11.568

That totals: 21.896 mil

Guan Ching's reported earnings so far this fiscal year? 39.241 million.

Would such 'hedging' gains be sustainable?

And some would be sceptical/worried with the size of loans Guan Chong is carrying and the recent surge in receivables!

tklaw said...

Wow! Gain from forex and commodity trade is huge…. represents 56% of the entire profit. I supposed the purpose of ‘hedging’ for a normal corporate is to minimize exposure to adverse fluctuation in foreign exchange and commodity price.

I reckon they have diversified into hedging business and stay in the forefront in managing business risks. Guan Chong is really an expert in hedging at this time. But don’t know how long it can last. Perhaps, receivable, loan and ‘hedging business’ would haunt investors in future.

solomon said...

Ha ha, the stock went to the Orbit today.....sometimes, the market just like to stir up some interest which I do not buy it.

I would call this "Cocoa King" or maybe "Challenger"....

Moolah said...

LOL! It sure did!

This is why I refrain from talking how what a stock will or will not do! (Yeah you can call me chicken! :P) (ps: Actually in case you do not know.. I am lousy! :P)

solomon said...

So long you think, whether it is correct or wrong, you are right in one direction but only unsure of its outcome.

Lousy Chicken is better than a Leopard who lost its presume this Leopard = SC, why aren't we see some action here since it is so glaring??

Moo Moo pack your bag...u are not suitable to write on this blog....the country need you to check on these Gentlemen....