Cocoaland’s new product line to be postponed

Cocoaland’s new product line to be postponed
Posted on November 23, 2010, Tuesday

KUCHING: Candymaker, Cocoaland Holdings Bhd (Cocoaland) postponed its proposed Cocopie and Gummy line of products as it was still scouring for a new plant to accommodate the additional lines.

In its research report, TA Securities Holdings Bhd (TA Securities) said the lines were expected to be completed and up-and-running in a year’s time.

On another note, Cocoaland was still in the trial-testing stage for original equipment manufacturers (OEMs) with big multinational corporations (MNCs) and thus, none would be reflected in its earnings this year.

In addition, the company which had begun marketing its own brands Fruit Ten and Cha in the market had been met with mundane response.

This was probably expected, as Cocoaland’s brand name was still relatively new in the Fraser and Neave Holdings Bhd (F&N) and Yeo Hiap Seng (M) Bhd (Yeo’s) dominated market, according to the research house.

It also mentioned that product and brand recognition traditionally took two to three years, but with Cocoaland’s synergistic relationship with F&N, it might allow Cocoaland’s products a shorter time to achieve that milestone thanks to F&N’s wide distribution network.

Furthermore, the research firm also commented on the company’s skyrocketing costs. The average price of sugar had increased more than 30 per cent year-to-date, cocoa powder by more than 20 per cent, packaging by more than 10 per cent and glucose by more than 15 per cent.

This was only partially mitigated by the weaker US dollar since 40 per cent of its sales were denominated in US dollars. TA Securities stated that trends were moving towards passing the costs to the consumers in the form of increasing selling prices by five per cent to 10 per cent.

Given the current circumstances, the research house expected net profit to be less than RM10 million on the back of weak first half of the year results in addition to operating losses of its beverage plant.

It pegged Cocoaland’s target price at RM2.14 per share based on financial year 2011 price earnings ratio of 16 times.

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