COCOLND – RM2.65 FIRM BUY (TECHNICAL)
(Stock Code: 7205) (Bloomberg Code: COLA MK Equity)
above: Cocoaland Weekly Chart analysis (click to enlarge)
COCOLND made a major weekly Wave 4 low of MYR1.70 (Jun 2011) with grossly oversold and bullish signals. Most of its chart indicators suggest a very firm upside move. It will break into higher territory, as it breached its key resistance areas (in a Symmetrical Triangle breakout) recently, accompanied by rising volumes.
FIRM BUY (TECHNICAL) on dips for COCOLND, with very strong support areas at MYR2.36 and MYR2.65. The upside target areas for the stock are at MYR3.25, MYR3.50 and MYR4.20.
COCOLND reported a 33.9% YoY revenue growth from MYR82.7m to MYR110.7m in its 1H12 results. The growth came via the increase in selling price and trading volume of their fruit gummy and beverage product
divisions, which experienced revenue growth of 32% and 250% YoY respectively. The group’s 1H12 PBT rose 80% YoY to MYR16m due to management’s efforts to improve production efficiency by way of process
automation, and better quality control in its manufacturing operations.
COCOLND’s new production facility for its hard candy line has started commercial operations in the current quarter, and its new fruit gummy line will be fully operational in 4Q12. This will enable COCOLND to broaden
its existing customer base and further reinforce its presence in both local and overseas markets moving forward. Management will continue to take the necessary measures to mitigate the risk of volatile material costs and intense competition in the market. In view of this, COCOLND is optimistic of achieving satisfactory results this financial year.
It was recently reported that COCOLND plans to invest approximately MYR74m in the next few years to expand its production capacity by building a new factory. With higher production capacity, it would be able tofulfil its customers’ total demand for its hard candy and fruit gummy products. Currently, it is unable to do so due to a lack of sufficient capacity. The expenditure would double its total production to 5.6m kg of hard candy
and 11.7m kg of fruit gummy annually.
below (click to enlarge) : Cocoaland - Quarterly Earnings Summary
Currently, Maybank-IB does not have fundamental coverage of COCOLND. A check on Bloomberg reveals that there is just one research house that covers the stock; it has a BUY call and TP of MYR3.05. COCOLND currently trades at a PER of 19.1x and an indicative dividend yield of 2.12%.
Cocoland Holdings Berhad (COCOLND) manufactures and provides food and foodstuff. It trades processed and preserved foods and fruits. It also manufactures, trades and distributes fruit juice and foodstuff on a wholesale and retail basis.
by Maybank IB