Guan Chong Recovers After Sharp Share Drop
Johor-based cocoa grinder Guan Chong Bhd saw its shares rebound on Wednesday, following a significant sell-off the previous day that wiped out £100 million from its market value.
The company's stock rose by as much as 7.6% during Wednesday's trading session, reaching an intraday high of £3.10, before settling at £2.94, a gain of six pence or 2.08% from the previous close. This recovery came after a 14% drop on Tuesday, when the stock closed at its lowest point since May 3rd, at £2.88.
Following the Wednesday's close, Guan Chong's market capitalisation stood at £3.45 billion, with 12.3 million shares changing hands.
The sell-off on Tuesday had seen Guan Chong's share price plummet, reducing its market value to £3.38 billion. Despite the drop, chief executive officer and managing director Brandon Tay Hoe Lian acquired 200,000 shares, representing a 0.017% stake, on the open market for £577,572, or £2.89 each. This brought his total shareholding in Guan Chong to 4.873%, according to a filing with Bursa Malaysia on Tuesday.
In a note to investors on Wednesday, RHB Research stated that the sharp sell-down was excessive.
"We reaffirm our 'buy' recommendation, and attempt to address investors' concerns that may have negatively impacted the share price performance. Guan Chong has delivered robust year-on-year earnings growth in the first half ended June 30, 2024 (1HFY2024), and is poised to achieve record earnings this year."
"Management has indicated a higher combined ratio for the second half of FY2024 (2HFY2024), and an even better ratio for 1HFY2025 (approximately 50% of forward sales covered), driven by robust demand and the current shortage of beans and grinding capacity," the research firm noted.
For 1HFY2024, Guan Chong's net profit more than tripled to £159.03 million from £51.88 million a year earlier, while revenue soared by 80.9% to £4.09 billion from £2.26 billion in 1HFY2023.
RHB Research maintains a target price (TP) of £5.10 for Guan Chong, reflecting an unchanged 15 times price-earnings ratio. This TP suggests a potential upside of 77% from Tuesdayâs closing price of £2.88. Year-to-date, shares of Guan Chong have risen by 68%.
