KUALA LUMPUR: Guan Chong Bhd’s acquisition of German chocolate maker Schokinag Holding GmbH and soon-to-be commissioned Ivory Coast plant could lift the firm’s earnings to the next level, said RHB Research.
The firm said the acquisition will help Guan Chong tap into the European Union market as well as minimise the risk of underutilisation at the upcoming Ivory Coast cocoa processing plant.
“Guan Chong plans to ramp up production by improving the utilisation rate and prioritising market share.
“The plant is currently running at only 67 per cent utilisation rate, and if the transition goes smoothly, it intends to increase the industrial chocolate production capacity to 120,000 tonnes per annum (from 90,000 tonnes pa),” RHB Research said following its meeting with Guan Chong’s management.
Guan Chong, the world’s fourth largest cocoa grinder, announced late last week that it had signed a sale and purchase agreement to buy all 25,000 shares in Schokinag for €29.93 million or about RM137.84 million.
RHB Research said Schokinag’s production, which was limited by restrictive working capital and high raw material prices, should also be resolved through synergising with Guan Chong.
The firm said Schokinag’s key management would be retained post-acquisition to ensure the continuity of the business operations.
“Well-experienced in the chocolate manufacturing business and familiar with local industry landscape, Guan Chong believes that the current team is the right fit for the job,” it said.
RHB Research has a “buy” call on Guan Chong with a target price of RM3.45.
“Guan Chong’s (current) earnings growth should be sustained on the back of growing demand for cocoa-based products globally, and wide customer network,” it added.
