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    Cocoland 20100727 - CU

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    Cocoaland Holdings’ (CH) has announced that it was “currently in discussions and negotiations with potential partners to broaden its growth which may lead to new placement of shares at discount”. The strategic partnership will involve the issuance of new shares amounting to between 20% and 30% of its share capital.

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    Cocoland 20100727 - CU

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    Cocoaland Holdings’ (CH) has announced that it was “currently in discussions and negotiations with potential partners to broaden its growth which may lead to new placement of shares at discount”. The strategic partnership will involve the issuance of new shares amounting to between 20% and 30% of its share capital.

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    Cocoaland Holdings’ (CH) has announced that it was “currently in discussions and negotiations with potential partners to broaden its growth which may lead to new placement of shares at discount”. The strategic partnership will involve the issuance of new shares amounting to between 20% and 30% of its share capital.

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    Cocoland 20100727 - CU

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    limml63
    Cocoaland Holdings’ (CH) has announced that it was “currently in discussions and negotiations with potential partners to broaden its growth which may lead to new placement of shares at discount”. The strategic partnership will involve the issuance of new shares amounting to between 20% and 30% of its share capital.

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    KENANGA RESEARCH Company Update

    26 July 2010

    BUY Cocoaland Holdings


    RM2.76
    Target Price: RM3.24 Strategic partnership in the making
    Stock data  Cocoaland Holdings’ (CH) has announced that it was “currently in
    Market cap (RMm): 181.2 discussions and negotiations with potential partners to broaden its
    Issued shares (m): 120.0 growth which may lead to new placement of shares at discount”. The
    52-week range: RM0.50-RM1.52 strategic partnership will involve the issuance of new shares amounting to
    3-mth avg daily volume: 64,0,832 between 20% and 30% of its share capital.
    Bloomberg code: COLA MK
    YTD price chg: 15.3
     We take a positive view on the news as a strategic tie-up would be positive for
    YTD KLCI chg: 1.7%
    Est. free float: 24.3% earnings growth for CH. Depending on the nature of the strategic tie-up, the
    Major shareholders: strategic partnership could potentially enable consolidation of CH’s products and
    Leverage Success S/B: 54.4% brings economies of scale to CH’s manufacturing operations in times of
    KLCI FBM30 FBM70 Syariah Hijrah escalating costs of packaging and raw materials. In addition, it could tap on the
    No No No Yes No distribution network of its new shareholder if it is within the F&B industry.
    Consensus
    FYE 31 Dec 2009E 2010E
     Earnings estimates unchanged. We will retain our earnings estimate for the
    Net profit (RMm): 20.2 22.1 moment pending the entry of a new shareholder as it remains uncertain how it will
    EPS (sen): 17.0 18.5 impact the business or the timing of the entry of the new shareholder.

    Forecast revision  Reiterate BUY recommendation with revised target price of RM3.24 using
    FYE 31 Dec 2009E 2010E a 15x PER applied to adjusted FY11 EPS of 21.6 sen. We have ascribed a
    Revision (%): - -
    higher target PER of 15x (which is at the upper end of the small sized
    Rev. net profit (RMm): 19.9 23.9
    consumer companies valuations) for CH given positive news flow on tie-ups
    Share price chart between Cocoaland and a potential strategic partner. In addition, we continue
    to see strong growth trend in CH’s food products with pick-up in consumer
    spending in-line with economic recovery and earnings contribution from new
    drinks lines.

    The Research Team Tel: 603-2713 2292


    research@kenanga.com.my

    Earnings Estimates
    FYE: 31 Dec (RMm) 2007 2008 2009 2010F 2011F
    Revenue 121.3 128.7 135.4 150.9 175.6
    EBIT 11.4 12.2 27.3 32.2 38.4
    Depreciation -4.6 -4.8 -5.3 -6.8 -7.5
    Pretax profit 11.2 10.9 26.5 31.4 37.6
    Net profit 8.8 8.7 19.9 23.9 28.5
    EPS (sen) 6.7 6.6 15.1 18.1 21.6
    EPS growth (%) -27.6 -2.1 129.9 20.1 19.5
    DPS (sen) 4.0 4.0 10.0 10.0 10.0
    NTA/share (RM) 0.63 0.67 0.73 0.82 0.94

    PER (x) 22.6 23.0 10.0 8.3 7.0


    Div. Yield (%) 2.6 2.6 6.6 6.6 6.6
    P/NTA (x) 2.4 2.3 2.1 1.8 1.6
    EV/EBITDA (x) 4.4 4.1 2.1 1.4 0.8
    Net Gearing (x) 0.0 0.0 0.0 0.0 0.0
    ROE (%) 11.0 10.1 21.6 23.4 24.5

    PP70027/07/2010(023510)
    This page has been intentionally left blank.

    This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not
    make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the
    specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document
    is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga
    Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any
    solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or employees
    may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or otherwise, and may
    receive brokerage fees or act as principal or agent in dealings with respect to these companies.

    Published and printed by:


    KENANGA INVESTMENT BANK BERHAD (15678-H)
    8th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia Yeonzon Yeow
    Telephone: (603) 2166 6822 Facsimile: (603) 2166 6823 Website: www.kenangaresearch.com Head of Research

    Cocoaland Holdings– 27 July 2010 Page 2 of 2

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