By Emmanuel Samarathisa
ANALYSTS are bullish over Guan Chong Bhd’s (GCB) proposed acquisition of a German-based chocolate maker Schokinag Holding Gmbh (SHG).
GCB, the world’s fourth-largest cocoa grinder, in a Dec 19 bourse filing said it had entered into a sale and purchase agreement with Netherlands-based Schokinag Holdings BV to purchase its entire stake in SHG for €29.93 mil (RM137.84 mil).
“Barring any unforeseen circumstances, the proposed acquisition is targeted to be completed within the first quarter of 2020,” GCB managing director and chief executive officer Brandon Tay Hoe Lian (pic) said in a Dec 19 statement.
Leinves PLT chief investment officer William Ng told FocusM that the move would bode well for GCB.
“The downstream acquisition will make GCB a more complete player since they have upstream and midstream capabilities. This would, in turn, boost topline and create a stable bottom line for the company,” he said on Dec 20.
Rakuten Trade Sdn Bhd vice-president Vincent Lau noted that the acquisition would help GCB deal with high demand.
“So not only do they get to gain access to a major chocolate market but also help meet a huge appetite for cocoa. That has always been one of the challenges with GCB,” he said.
RHB Research analysts Lee Meng Horng and Muhammad Afif Zulkaplly have a buy call on the stock with a higher target price of RM3.45 from RM3.25.
“The news is deemed positive as it would give the group access to the biggest chocolate market – the EU. The vertical expansion also would provide synergistic opportunity and mitigate Ivory Coast expansion risks,” they said in a Dec 20 note.
Located in Mannheim, Germany, SHG’s industrial chocolate plant has an annual capacity of 90,000 tonnes, while its cocoa processing plant can grind 7,000 tonnes of cocoa beans into cocoa mass per year.
SHG produces a wide range of chocolate goods such as chocolate couvertures, from liquid to solid, as well as liquid compounds.
This is the second acquisition by GCB this year. In August, the group announced it had set aside €60 mil (RM278 mil) for a new 60,000-tonne cocoa bean processing plant in Ivory Coast, its first factory in Africa.
As of end-September, land preparatory works had commenced with commissioning expected in the first quarter of 2021.
GCB’s Tay said SHG would require about 40-50% of the supply of cocoa ingredients from the group’s upcoming processing plant in Ivory Coast.
“This ensures that our incoming new cocoa grinding capacity will be met with immediate demand,” he said.
GCB shares closed 2.42% higher at RM2.96 on Dec 20. – Dec 20, 2019
