KUALA LUMPUR (Oct 5): Guan Chong Bhd plans to raise up to RM800 million from the issuance of Islamic medium-term notes (sukuk wakalah) to support the group's ongoing expansion of its international operations.   

In a filing with Bursa Malaysia today, the cocoa grinder said it has lodged the relevant documents with the Securities Commission Malaysia to establish a Sukuk Wakalah programme for the purpose, and that the programme will have a tenure of 20 years from the date of the first issuance. Proceeds will be used to fund its general working capital and capital expenditure, as well as to refinance its borrowings.

The programme has been assigned a preliminary rating of AA-IS with a stable outlook by Malaysian Rating Corporation (MARC), it said.

The strong rating from MARC reaffirms the strong fundamentals of Guan Chong’s financial and sustainable business model, said Guan Chong's managing director and chief executive officer Brandon Tay Hoe Lian.

The group, which is gearing itself up for accelerated expansion, said the first tranche of issuance is expected to amount up to RM300 million, with the subsequent tranches to be issued anytime within the 20-year tenure.

“Proceeds from the first tranche of issuance of RM300 million would go towards funding the ongoing construction of our new cocoa grinding facility in Cote d’Ivoire, which is targeting to commence operations in the second half of 2021. The programme would also support our expansion in Europe, following our acquisitions of industrial chocolate provider Schokinag in Germany, and the land and building in the United Kingdom,” Tay said.  

The simultaneous expansions into Cote d’Ivoire and Europe come as the group executes its two-pronged growth strategy of being close to the raw material source and close to the market, towards realising its aim to become a leading global supplier of cocoa ingredients.

"Guan Chong's growth trajectory in the recent past has been mainly powered by capacity expansions in Southeast Asia, serving global clientele. Today, we are clearly embarking on establishing our operational presence worldwide to stake a higher claim in the cocoa grinding sector in the future," Tay said.

Guan Chong’s gross gearing stood at 0.6 times as at June 30, 2020, comprising mainly short-term borrowings. The first tranche of the sukuk wakalah issuance would lift the group’s gross gearing to 0.8 times, which the group said is a comfortable level.

The cocoa grinding facility in Cote D’Ivoire will have an annual grinding capacity of 60,000 metric tonne (MT), which would increase the group’s annual grinding capacity from 250,000 MT currently to 310,000 MT. The investment in the facility is estimated at up to €60 million (RM293 million).

Maybank Investment Bank Bhd is the sole principal adviser and lead arranger for the Sukuk Wakalah programme.

Guan Chong shares closed up three sen or 0.93% at RM3.24, valuing it at RM3.34 billion. Some 426,300 shares were traded.

The counter's share price has more than doubled from its March low of RM1.56.