KUCHING: Cocoaland Holdings Bhd (Cocoaland) is in the final stages of negotiations with potential partners for a placement of new shares to further enhance its operaions.
ENHANCING OPERATIONS: The placement of shares will enable Cocoaland to enhance its operations and boost total capacity in its production lines.
According to AmResearch Sdn Bhd, Cocoaland had on July 21, 2010 revealed it was in discussions with potential partners to broaden its growth. The group has since indicated potential new placement of shares at between 20 per cent and 30 per cent of its issued and paid-up capital, with completion scheduled at the end of August.
The research house pointed out that one of the negotiation partners might commence due diligence on the group by this week. This latest development was a positive surprise, but it was cautiously optimistic due to insufficient details at this juncture.
Cocoaland’s stock price ran up 11 per cent during trading last week driven by news of potential strategic partners. The group also indicated potential earnings enhancement through product and market development. While any strategic tie-up would be positive for earnings growth, there was risk it may not be immediately accretive, it cautioned.
Commercialisation of the group’s maiden polyethylene terephthalate (PET) bottle operations should commence soon this August-September, while the commissioning of another PET production line was expected to double total capacity to 240 million bottles per annum by end-fiscal year 2011 (FY11), stated AmResearch.
Additionally, the installation of a third production line for group’s core product of fruit gummies was also underway, boosting total capacity by another 60 per cent to 6,700 tonnes upon completion.
Meanwhile, AmResearch expected acceleration in sales momentum of the group’s Cocopie chocolate on further rollouts to under-penetrated markets. It pegged Cocoaland’s fair value at RM3 per share, based on a price earnings (PE) of 12 times FY11 forecast earnings pegged to a 10 per cent discount to the average PE of consumer stocks, pending further details.