HwangDBS Vickers Research has maintained a "buy" call on Guan Chong Bhd shares with a lower target price of RM2.80.
In a research note today, HwangDBS said Guan Chong was expected to meet its full-year financial year 2011 net profit estimate of RM118.8 million but lack order visibilty post-financial year 2011.
HwangDBS said beyond the near-germ global uncertainties, the group was poised to be among the top five largest cocoa processors in the world.
"The group normally signs forward contracts with buyers to sell cocoa butter and cocoa powder or cake products to secure sales upfront," it said.
It said Guan Chong was also a net beneficiary of a stronger US dollar as nearly all receivables (exports accounted for over 95 per cent of sales) and payables were dominated in US dollar.
"This also provides a natural edge for the group's borrowings (RM384 million at end-September 2011), which are mostly denominated in US dollar and primarily used to purchase cocoa beans," it said.
HwangDBS said the stock, after plunging from a high of RM2.52 in November 2011 to a low of RM1.99 in December 2011, has recovered to RM2.33 currently.
It said the progressive disposal of 10.3 million Guan Chong shares and the cessation of Lembaga Tabung Angkatan Tentera as a substantial shareholder at end-December 2011 may lift near-term overhang on the stock. -- Bernama
In a research note today, HwangDBS said Guan Chong was expected to meet its full-year financial year 2011 net profit estimate of RM118.8 million but lack order visibilty post-financial year 2011.
HwangDBS said beyond the near-germ global uncertainties, the group was poised to be among the top five largest cocoa processors in the world.
"The group normally signs forward contracts with buyers to sell cocoa butter and cocoa powder or cake products to secure sales upfront," it said.
It said Guan Chong was also a net beneficiary of a stronger US dollar as nearly all receivables (exports accounted for over 95 per cent of sales) and payables were dominated in US dollar.
"This also provides a natural edge for the group's borrowings (RM384 million at end-September 2011), which are mostly denominated in US dollar and primarily used to purchase cocoa beans," it said.
HwangDBS said the stock, after plunging from a high of RM2.52 in November 2011 to a low of RM1.99 in December 2011, has recovered to RM2.33 currently.
It said the progressive disposal of 10.3 million Guan Chong shares and the cessation of Lembaga Tabung Angkatan Tentera as a substantial shareholder at end-December 2011 may lift near-term overhang on the stock. -- Bernama
