Tuesday, February 01, 2011

Update On Guan Chong's Earnings

So Guan Chong reported its earnings.

On the Edge yesterday.

It was featured last week on the Edge: Cocoa windfall for Guan Chong

On today's Business Times.

  • Guan Chong revenue soars

    By Ooi Tee Ching Published: 2011/02/01

    GUAN Chong Bhd (5102), a cocoa processor from Johor, saw revenue for the financial year ended December 31 2010 surge above the RM1 billion mark, while group level net profit grew by slightly more than seven times.

    The company said that revenue for the financial year under review stood at RM1.16 billion versus RM642.65 million in the year before.

    Net profit, meanwhile, stood at a record RM100.01 million versus RM14.26 million in the same period a year ago.

    In a filing to the stock exchange, Guan Chong attributed the positive results to several factors such as the strong ringgit.

    The company also made strides due to cocoa product sales at higher prices, gains on commodity futures contracts and net fair value gains on foreign exchange derivatives.

    Last year, the Johor-based export-driven company also expanded its annual production capacity to 82,000 tonnes from about 59,000 tonnes in 2009, in anticipation of more business coming its way.

    This year, it is set to expand further in Indonesia.

    Guan Chong managing director and chief executive officer Brandon Tay Hoe Lian, in a statement, said the group's products are in almost every part of the world.

    "The continued strong demand for our cocoa products indicates that global consumer sentiment is still on an uptrend," he said.

    "Our upcoming cocoa grinding facility in Batam, Indonesia, will have an initial capacity of 50,000 tonnes an annum. It will start operations in first quarter of 2011. We're positioned to capture an even-larger market share globally," he added.

    To date, Guan Chong has a global network of more than 70 distributors and exports cocoa ingredients to more than 60 countries worldwide.

Missed on this gem?

Ah ... this stock was posted before.

So we have a BILLION ringgit company making a HUNDRED million ringgit.

And we have a beautiful looking stock chart.


How?

Missed out on the gem?

As posted in the posting, Review Of Guan Chong's Earnings , it was noted that Guan Chong
  • .. gain from commodity future contracts and net fair value gains on foreign exchange derivatives.

Let's have a look at that issue.

From yesterday earnings notes.





This was from the Nov's earnings notes.



And this was from Aug's earnings notes.



And these are the outstanding derivative contracts.



How? Too much?

Let's see what 100 million profit does for Guan Chong's cash flow...



Ok, it bought some property, paid some loans back, paid more dividends but after a 100 million profit, Guan Chong's cash flow showed only minimal improvement.

And the receivables issue..



How?

Of course there's a good chance the market will like what they see but do you?

And earlier last month: Guan Chong expects to raise RM120mil
  • Saturday January 8, 2011

    Guan Chong expects to raise RM120mil

    KUALA LUMPUR: Guan Chong Bhd (GCB) expects to raise up to RM120mil from through its corporate exercise of issuing RM2 for 60 million free warrants.

    “Based on the exercise price of the warrants of RM2 per new GCB share, the company stands to potentially raise up to RM120mil during the tenure of the warrants upon full exercise of the warrants by the holders of the warrants.

    “Such proceeds will be utilised for the day-to-day working capital requirements of the GCB group,” it told Bursa Malaysia yesterday.

    The company said that it had fixed the exercise price for the warrants at RM2, which was 9.29% or 17 sen over the theoretical ex-price after the proposed bonus issue of RM1.83 per share, based on the five-day volume weighted average price of RM2.44.

    The 60 million warrants were issued on the basis of one free warrant for every four existing shares held on the same entitlement date for the proposed bonus issue.

    The corporate exercise also involved the proposed bonus issue of 80 million new shares of 25 sen on a one-for-three basis.

6 comments:

ronnie said...

Moola

Cannot understand why Goncang is issuing warrants ...

ronnie said...

Moola,

What is your view on Lattexx where Mettiz and Mickey Tang of KNM fame are involved?

Moolah said...

Me too!! Here you have ... this company... enjoying ... err... the best 'windfall' ... ever... and yet they want to raise money!!!!

LOL!

Just doesn't compute. :P

Latexx deal? I really have no idea. Sorry.

solomon said...

Nice to see the headline, but my gut feel is this company is risking itself by dipping it's feets in future trading.

On Latexx, I doubt BT LOW will sell it's biz unless he call it a day. What a man lives for tomorrow is he can look forward for challenges......never knows maybe he has changed since the last we met?

K C said...

Is Guan Chong (GC) an upstream coco processor or a derivatives speculator?
Looking at Moola's breakdown on GC's profit, it appears that almost all of GC's profit is from coco future (and stocking up of inventory of coco) and currency derivative. A business is wise to hedge against price fluctuation or currency risk in order to have smooth and predictable profit, not for the purpose of an extraordinary gain. In GC's case, when coco price goes up, its coco processing operation will suffer (unless it can pass all cost increase to its client). This loss position will be approximately offset by the gain from its long position in coco, and vice versa. How did GC manage to do so well in this aspect? Pure speculation of course. It was lucky that lady luck was with GC. It could well be the other way around. In short, this type of speculative gain, is no doubt, unsustainable. GC should concentrate on how to improve its efficiency in coco processing business and hence increase its extremely meager profit margin in this operation, rather than embarking on speculation on derivatives.

William said...

KC, I had asked the same question. Cocoa pruducer or future speculator. This reminded me of kwantas, when revenue was above a billion, they lost a bundle of shareholders' money, what happens now?