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)
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Cocoaland Holdings– 27 July 2010 Page 2 of 2