's recently completed acquisition of German chocolate maker Schokinag Holding GmbH is expected to take up 50% of the group's Ivory Coast plant's capacity, which should be sufficient for it to break even, says RHB research.The research house said Schokinag should contribute to Guan Chong's bottomline from February onwards.
"Its contribution at 2020 PBT level is estimated at EUR5m (c.MYR23m), while Germany’s statutory tax rate, including the municipal trade tax rate, is c.30%," it said.
Schokinag's contributions are expected to offset any expected increase in effective tax rate as Guan Chong fully utilised its investment tax allowance.
Guan Chong is also expected to record a 1Q20 disposal gain of RM25mil as Fuji Oil Asia has exervised its call option to acquire its remaining 27.75% stake in Fuji Oil Global Chocolate for RM32mil.
According to RHB, cocoa bean prices have normalised to about RM2,500 a tonne from about RM2,700 a tonne in 4Q19.
Cocoa butter should improve and reduce the reisk of potential margins compression if a sudden bean price decline occurs, it said.
"The normalisation of such prices should also provide margins stability for cocoa solid products, as steep movements in the terminal price may affect GUAN due to time lags in passing through costs," it added.
RHB reiterated its buy call on Guan Chong and target price of RM3.45.