This article first appeared in The Edge Financial Daily, on December 17, 2015.
Guan Chong Bhd (-ve)
COCOA processor Guan Chong (Fundamental: 0.35/3, Valuation: 0.5/3) has surged 51.8% to RM1.29 since it announced a strong 3Q2015 results three weeks ago.
For 3Q2015, revenue surged 72.2% y-y to RM708.8 million on the back of higher average selling price and volume of cocoa cake and powder. It recorded a net profit of RM21.7 million, reversing a net loss of RM13.2 million a year ago.
Notably, during the quarter, receivables swelled to RM460 million while net gearing increased slightly to 266.3%.
Last year, the cocoa grinding company slipped into the red with a net loss of RM17.6 million, hit by an inventory write down of RM19.9 million. With bulk of its costs of sales and borrowings in USD, it also incurred forex losses of RM32.3 million arising from the appreciating USD.
Guan Chong, which exports 55.4% of its production, attributed the losses to the global oversupply of cocoa powder. It has since focused on reducing inventory level and optimising production.