9 Key Things To Know About Cocoaland Holdings Bhd

Here is yet another classic example of a Malaysian homegrown success story which has humble beginnings.

In the 1970s, two of the Liew & Lau (same Chinese surname) brothers began as food vendors, selling deep fried snacks and banana fritters ‘Goreng Pisang’ from a van in the Klang Valley. Later, they were joined by their other siblings and had set up their first factory in Kampar to manufacture polytubed drinks in 1980. The brothers had set up its second and third factories in Kepong and Rawang in the mid-1990s.

In 2005, Cocoaland Holdings Bhd (Cocoaland) was listed on Bursa Malaysia and has grown into a popular manufacturer of gummies, preserved food, and beverages in Malaysia. As I write, Cocoaland is valued at RM 514.8 million in market capitalization, a multiple of 10 times from RM 55.8 million when the company was first listed in 2005.

Here, I’ll share 9 quick things that you need to know about Cocoaland before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: COCOLND / KLSE: 7025
Market Capitalization: RM 514.8 Million (30 April 2018)

Share Price: RM 2.25 (30 April 2018)

Industry: Consumer Products

Syariah Compliant: Yes

#2: The Business

Cocoaland operates 4 manufacturing plants under the following subsidiaries:

  1. Cocoaland Industry Sdn Bhd (CISB)
    CISB operates two plants in Rawang and one plant in Kepong which is in the state of Selangor. It is presently the principal manufacturing arm of Cocoaland, producing gummies, hard candies, wafers, snacks, chocolates and beverages under a portfolio of brands such as Lot 100, Cocopie and Koko Jelly.

  2. B Plus Q Sdn Bhd (BPQ)
    BPQ has a plant in Kampar in the state of Perak which manufactures soft drinks, wafer rolls, peas, nuts, jelly cups, snacks, and crackers. To name a few, its portfolio of brands include Diction and Rotong.

#3: Profitability

Since 2005, Cocoaland has delivered consistent growth in both revenues and profits to its shareholders. Sales have increased from RM 100.3 million in 2005 to RM 267.2 million in 2017. Shareholders’ earnings had grown from RM 8.36 million in 2005 to RM 33.5 million in 2017.

During the 13-year period, Cocoaland has achieved Return on Equity (ROE) average of 12.52% a year. This means, it has generated, on average, RM 12.52 in annual earnings from every RM 100.00 in shareholders’ equity during the period from 2005 to 2017.


Source: Annual Reports of Cocoaland Holdings Bhd

Calculated from Figures Obtained from Cocoaland’s Annual Reports

#4: Balance Sheet Strength

As at 31 December 2017, Cocoaland does not have any interest-bearing debts, thus, having zero in gearing ratio. Cocoaland has grown its cash reserves over the last 13 years. It increased from RM 5.91 million in 2005 to as much as RM 79.6 million in 2017.


Source: Annual Reports of Cocoaland Holdings Bhd

Note:

In 2010, Cocoaland has received RM 70.8 million from a private placement as it successfully raised money from F&N. Ever since, F&N became Cocoaland’s second largest shareholder. In 2011 and 2012, Cocoaland had utilized the bulk of these cash into expanding its production facilities for its fruit gummy and as well as hard candy lines. This had caused Cocoaland’s cash reserves to fall to RM 23.9 million in 2013, down from RM 71.1 million in 2010.

#5: Efficiency Ratio  

There are three efficiency ratios:

  1. Debtor Days
    Cocoaland has a 10-Year Debtor Day Average of 67.5 days. It means, Cocoaland has taken 67.5 days to collect cash from customers after billing them.

  2. Inventories Days
    Cocoaland has a 10-Year Inventory Day Average of 70.3 days. Hence, it indicates that Cocoaland has taken an average of 70.3 days to clear off its inventories once it has received its raw materials after buying them from its suppliers.  

  3. Creditor Days
    Cocoaland has a 10-Year Creditor Day Average of 53.0 days. Thus, it indicates that Cocoaland has taken an average of 53.0 days to make payments to its suppliers once being billed by them.

Calculated from Figures Obtained from Cocoaland’s Annual Reports

#6: Future Outlook

Here are the key highlights of Cocoaland moving forward:

Expanding into Indonesia

In 2018, Cocoaland Holdings Bhd intends to expand its footprint in Indonesia with it progressively having the approval on the distributorship of its own brand products which include gummies and choco pies in the country.

New Premium Product

In Q4 2017, Cocoaland Holdings Bhd has launched a premium product i.e. “A’ Fresh gummy”, which is enhanced with vitamins, calcium, collagen, colostrum and DHA through online e-commerce platforms. In November 2017, the online credit card payment gateway was successfully activated. In near future, Cocoaland will allocate more advertising and promotional resources to market its existing and new products in overseas markets such as Indonesia, China, South Korea and Vietnam.

New Gummy Line Project

In addition to its expanding higher quality products, in particular, to cater for the sales growth in gummies, Cocoaland expects to commence a new gummy line project towards the second half of 2018 located in Rawang with expected capital expenditure projected at RM 42.0 million. Cocoaland is also working towards to expand its gummy products in terms of new flavors and healthier ingredients to cater for demand in both local and overseas markets.

US$ 10 million on M&A activities

There will be about of US$ 10.0 million or RM 39.0 million for use in the event of merger and acquisition opportunities. The Group is targeting manufacturers and distributors in Asian countries.

#7: Valuation

As I write, Cocoaland is trading at RM 2.25 a share.

In 2017, Cocoaland has reported earnings per share (EPS) of 14.7 sen. Hence, its current P/E Ratio works out to be 15.31. In 2017, Cocoaland has reported having RM 1.093 in net assets a share. Hence, it has a current P/B Ratio of 2.06.

Cocoaland has declared 13.0 sen in dividends per share (DPS) in 2017. If it is able to maintain its DPS at 13.0 sen, its expected gross dividend yields work out to be 5.78% if I invest in Cocoaland at RM 2.25 a share.

#8: Investors Relation

For further enquiries or to request for additional investment information on Cocoaland Holdings Bhd’s Investors Relation matters, you may contact:

Website: https://www.cocoaland.com/

#9: Major Shareholders

As at 23 March 2018, the substantial shareholders of Cocoaland Holdings Bhd and their respective shareholdings are as followed:

– Leverage Success Sdn Bhd: 38.04%

– Fraser & Neave Holdings Bhd: 27.19%

– Eastspring Investments Small-Cap Fund: 2.24%

– Public Islamic Optimal Growth Fund: 2.13%

– Tan Booi Charn: 1.85%

Note:

Liew Fook Meng, Lau Kee Von, and Lau Kim Chew are major shareholders of Cocoaland Holdings Bhd via their interests in Leverage Success Sdn Bhd. They are appointed as Executive Directors of the company.

Charoen Sirivadhanabhakdi and Khunying Wanna Sirivadhanabhakdi are major shareholders of Cocoaland Holdings Bhd via their interests in Fraser & Neave Holdings Bhd.

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Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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