KUALA LUMPUR (March 3): Chocolate maker Guan Chong Bhd’s share price jumped 15 sen or 5.7% to an intraday high of RM2.78 today on news that its Singaporean subsidiary had concluded its acquisition of German chocolate maker Schokinag Holding GmbH for RM137.84 million at the end of January.

In a Bursa Malaysia filing yesterday, Guan Chong said its unit GCB Pte Ltd had completed the purchase of Schokinag on Jan 30.

Guan Chong said the purchase would help it to expand its presence in Europe and target new growth opportunities in the world’s largest chocolate-consuming market.

AmInvestment Bank has maintained its ‘Buy’ call on Guan Chong and slightly raised its fair value to RM3.53 per share on a price-earnings (PE) ratio of 13 times pegged to earnings per share (EPS) of 27.2 sen for the financial year ended Dec 31, 2021.

In a research note, the investment bank said its PE ratio was at a discount to Guan Chong’s international peers’ average forward PE of 19 times.

“The group raised their financial year 2020 forecast (FY20F), FY21F and FY22F earnings forecasts by 6%, 1% and 1% respectively. This is to reflect the gain on disposal of FGC (Fuji Oil Global Chocolate), lower EBITDA yield of its cocoa products and consolidation of Schokinag business,” it said.

To recap, Guan Chong had announced its proposed sale of a 27.75% stake in FGC for RM32 million, which will be used as working capital and repayment of trade loans within six months.

“The group is expecting a gain on disposal of associate of circa RM25 million. We have made changes to our earnings forecast to reflect this. The disposal is expected to be completed in 1QFY20.

“There is still uncertainty on how the living income differential (LID) will be implemented and the extent of its impact to the group. Thus, the group is expecting a more volatile second half financial year 2020 (2HFY20) as orders have not been fully filled in for that period," it said.

The LID is a living income premium of US$400 per tonne introduced by the Ivory Coast and Ghana on all cocoa sales for the 20/21 season.

“So far, the group has not seen much impact from the Covid-19 outbreak aside from its business in China, which is minimal for Guan Chong,” it added.

At 11am today, Guan Chong’s share price was RM2.63, with 1.48 million shares traded. It had a market capitalisation of RM2.66 billion.