KUALA LUMPUR (April 22): AmInvestment Bank Bhd on Friday (April 22, 2022) initiated coverage on Cocoaland Holdings Bhd's shares with a "buy" call and a fair value (FV) of RM1.37, taking into account the candy maker's shares being traded at an attractive valuation level versus the broader market.

Looking back at Cocoaland's business, AmInvestment analyst Muhammad Afif Zulkaplly wrote in a note that with a 16-year profitability streak since its listing in 2005, demand for Cocoaland's products has stood the test of time.

"The robust demand is mainly attributed to the group's strong in-house brand presence in the confectionary market, thanks to years of brand building.

"Cocoaland [shares] currently trades at an attractive ex-cash FY22F PE (price-earnings ratio) of 14x vs the KL Consumer Product Index's (Bursa Consumer Products and Services index) 12-month forward PE of 20x, Power Root's 31x and QL Resources' 57x.

"This is unjustified given the strong earnings recovery projections [of Cocoaland] for the next three years (2022–2024F earnings CAGR [compound annual growth rate] of 24%), on the back of the wider economic recovery and contributions from the new gummy production line, together with a compelling dividend yield of 4%," Muhammad Afif said.

Cocoaland's financial year ends on Dec 31.

Muhammad Afif said AmInvestment's FV for Cocoaland shares was derived from a target price-earnings ratio of 19 times for FY22.

At Bursa on Friday, Cocoaland's share price rose one sen or 0.83% at 10.26am to RM1.22, which values the company at about RM553.97 million.

Cocoaland has 454.07 million outstanding shares, according to its latest quarterly financial report.