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Corporate Presentation

IR Adviser. Corporate Presentation. Corporate Update 5 June 2012. Presented by: Mr. Brandon Tay , Managing Director. AQUILAS. An undervalued investment case with strong growth….

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Corporate Presentation

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  1. IR Adviser

    Corporate Presentation

    Corporate Update 5 June 2012 Presented by: Mr. Brandon Tay, Managing Director AQUILAS
  2. An undervalued investment case with strong growth… One of the largest cocoa processors in the region, to be ranked top 5 in the world once 2nd line of 60k MT in Batam is commissioned Produces high quality cocoa ingredients that are sold to global customer base of top chocolate and F&B product makers Comfortable earnings visibility, with 80% of total capacity in Pasir Gudang (80k MT) and Batam’s 2 lines (90k MT) sold for 2012 Long-term demand likely to stay firm due to strong demand for chocolate products in emerging markets Growth catalysts to come not only from the new capacity in Batam, but also potential huge off-take from 2 renowned F&B brand names Currently (as at 1.6.12) trading at affordable PE ratio of 6.6x (FY2011), and decent dividend yield of 4.3% with dividend policy of minimum 25% payout Likely re-rating catalyst to come from secondary listing exercise on SGX-ST Executive Summary
  3. 1Q12 Operations Review 1Q12 Financial Review Corporate Update Investment Merits Appendix: Corporate Profile Agenda

  4. 1Q12 Operations Review

    Capacity continues to increase…
  5. A strong start for the Group going into FY2012… Ground 33.2k MT of cocoa beans in 1Q12, 25.8% more than 26.4k MT in 1Q11 PasirGudang: 17.7k MT Batam first production line: 15.5k MT 80% of the capacity for both plants sold for FY2012 Still pending follow-up audit from the 2 renowned F&B MNCs and the installation of special packaging line EBITDA margins and yield continue to be sustained, as a result of improved sales mix and economies of scale 1Q12 Operations Highlight
  6. Batam plant’s 2nd line to commission in end 2Q12… to include more value add activities Update of Batam Plant 2nd production line of 60k MT on track for operation in end 2Q12 Facility to include not only grinding, but also further value add activities of powder pulverizing mill and deodorized butter plant 1Q12 Operations Highlight

  7. 1Q12 Financial Highlights

    Strong start into 2012…
  8. Overall growth in line with increase of production tonnage… bottomline growth would have been in line if 1Q11’s tax benefit excluded # Based on 319.7 million shares of RM0.25 par 1Q12 Income Statement
  9. 1Q12 EBITDA yield increases, due to better combined product margins and stronger USD… FY10: RM1,524.1 (avg) FY11: RM1,307.2 (avg) Yield Trend
  10. 1Q12 saw higher sales of cocoa butter to a local peer, likely for re-export… Group’s export continues to grow -11.2% yoy +245.0% yoy +21.7% yoy +10.5% yoy Revenue Segmentation: Export/Local
  11. Rising cocoa powder/cake prices resulting in bigger percentage revenue contribution… mitigating lower butter ratio/price Powder +37.3% yoy Price of Cocoa Powder: Jan 2009: USD1,500/MT Jan 2010: USD3,600/MT Jan 2011: USD4,400/MT Aug 2011: USD5,000/MT +72.7% yoy Cake Butter -14.1% yoy Liquor -36.0%yoy Others Cocoa Butter Ratio: Jan 2009: 2.60x Jan 2010: 1.70x Jan 2011: 1.35x Aug 2011: 1.08x Revenue Segmentation: Product
  12. Rising revenue spurred by increased capacity… FY12 to see record sales tonnage 6-year CAGR (FY05-FY11): 22.3% Revenue Trend
  13. 1Q12 margins continue to improve from improved sales mix… * * * * Benefited from export tax incentives; FY10: RM18.2 mil, FY11: RM9.0 mil, 1Q11: RM5.6 mil Profitability Trend
  14. Balance sheet improves further as working capital needs for Batam plant eases off… Adjusted, based on 319.7 million ordinary shares of RM0.25 each Balance Sheet (highlights)
  15. Gearing drops in line with lower borrowings… 58% of which is raw beans Analysis of Borrowings
  16. Higher working capital needs for increased requirement of beans to mitigate supply risk… Drop in ROE due largely to lower average asset base in FY2011 * Annualized based on 1Q12 data Key Financial Ratios
  17. Committed to 25% dividend payout policy… Dividend Policy: 25% of Net Profit (effective FY2011) Includes 2.5sen to be paid on 22/6 (ex date 6/6) Includes 2.0sen to be paid on 26/7 (ex date 10/7) # Net DPS adjusted for 1-for-3 Bonus Issue in Feb 2011 Dividend History

  18. Corporate Update

  19. Secondary listing exercise to raise profile with regional investors in Singapore…also raising proceeds for working capital needs On 9 Apr 2012, GCB proposed a Public Issue of up to 62mil shares on SGX-ST for secondary listing exercise (31mil new and 31mil vendor shares) and 1-for-2 Bonus Issue SC has approved the secondary listing; SGX also provided the conditional eligibility-to-list on the Main Board of the SGX-ST Assuming current market price, gross proceeds are estimated to be RM80 ~ 100 mil for GCB. * Assuming no warrants are exercised # Proforma based on post-bonus issue, but before conversion of warrants ^ Assuming raising RM80.0 mil from 31mil of new shares Corporate Exercise

  20. Investment Merits

    Upside from re-rating…
  21. GCB, an investment into a business with potential to be a global player…at valuation that has yet to reach potential Investment Merits

  22. Thank You

    IR Contact: Mr. Terence Loo T: 03-27111391 / 012-6295 618 terence@aquilas.com.my

  23. Appendix

  24. Corporate Profile

    Homegrown…into top international league
  25. The only pure cocoa player listed on Bursa… Corporate Information
  26. Amongst the top 10 largest cocoa processors in the world… Guan Chong Berhad (GCB) embarked on cocoa business in Pasir Gudang, Johor in 1990 Began with processing capacity of 6,000 MT/year Today, GCB is amongst the industry’s global market leaders with total capacity of 140,000 MT/year Presence in Pasir Gudang, Malaysia (80,000 MT/year bean grinding, blending & mixing) Delaware, USA (cake grinding) and Batam, Indonesia (60,000 MT/year bean grinding) Cocoa products marketed under the “Favorich” brand GCB has a global distribution network of >70 distributors/agents and exports cocoa products to established clientele in >60 countries, including world-famous chocolate makers and leading cocoa ingredient traders Background
  27. Aiming to be the preferred global supplier… Committed to being a long-term and preferred cocoa supplier worldwide Vision To be the top 5 cocoa ingredient supplier worldwide Mission Mission & Vision
  28. 20-year track record of continuous growth and expansion… 2002 Began producing cocoa preparation in Malaysia 2006 Began producing chocolate and beverages for private labels in Malaysia 2011 Commenced production of cocoa ingredients in Indonesia 1991 Began producing cocoa ingredients in Malaysia. (Capacity grew from 6K MT to 80K MT in 21 years) 2005 Commenced production of value-added cocoa ingredients in USA 2009 Began producing industrial chocolate, covertures and compound chocolate in Malaysia Corporate Milestones
  29. Focused only on cocoa business, covering all value-adding aspects of cocoa processing… Bean processing Blending & Mixing Industrial Chocolates Consumer Cake grinding 90% 10% Corporate Structure
  30. Comprehensive cocoa processing activities…with plants close to each other for economies of scale and to seaports for cost benefits Guan Chong Cocoa Manufacturing S/B Bean processing (24-hr operations) at PasirGudang Annual capacity: 80k MT; supported by a warehouse of 28,101 sq m Enrich Mix S/B Sugar cocoa preparation at PasirGudang Annual capacity: 20k MT ISO:9001 and HACCP certified GCB Specialty Chocolates S/B Industrial chocolate production (e.g. chocolate coating, sauce & cream, baking chips, etc) at PasirGudang Annual capacity: 2,400 MT (to be increased to 10,000 MT by 1Q2013) GCB Foods S/B Producing own ‘Cacaorich’ brand chocolate beverages, and OEM chocolate malt drinks for hypermarket house brands at PasirGudang Annual capacity: 2,400 MT ISO:22000, Halal and MS 1480 certified Production Facilities: Malaysia
  31. Batam plant benefiting from close-to-source & zero tariff beans…while downstream facility in US not only close-to-mkt but synergistic to Group Incorporated in Delaware in 2000, acquired by GCB as 49% associate in 2006 Equipped with cake grinding system to produce cocoa powder (incl. drop stations, silo, alkali solutions system, Anco cookers, blender & mills) Annual capacity: 7,000 MT ICS-certified company to produce organic black powder and organic alkalized powder PT Asia Cocoa Indonesia Incorporated in 2010, and wholly owned by GCB Situated in Batam, the Group’s second bean grinding factory started production in Feb 2011 with initial annual capacity of 60,000 MT 2nd line of 60,000 MT to be ready mid 2012 Production Facilities: Foreign
  32. Integrated operations from manufacturing to distribution… Business Model Distribution Contribution to FY11 revenue Plantation Product Development Local Cocoa Ingredients 5.7% Manufacturing Cocoa Preparation Branding & Marketing Industrial Chocolates Export 94.3% Distribution Consumer Chocolates Business Model
  33. Producing the finest cocoa ingredients for highly-discerning customers…comprehensive product range 35%# 80%# 45%# # 1MT of cocoa beans typically yield 0.8MT of by products of cocoa butter (0.35MT) and cocoa cake (0.45MT) Revenue Contribution (FY11) Product Range Cocoa Ingredients Cocoa Ingredients Cocoa Preparations Cocoa Preparations Cocoa liquor Cocoa liquor Cocoa cake Cocoa cake 5% 5% 30% 30% 3% 3% Covertures & Confectioneries Covertures & Confectioneries Cocoa butter Cocoa butter Cocoa powder Cocoa powder 2% 2% 39% 39% 21% 21%
  34. Wide distribution network of >70 distributors/agents to fulfill global demand… Direct Well-supported by major chocolate manufacturerse.g. MARS, Hershey’s, Lotte, Cocoaland, London Biscuit, Apollo Indirect 71 Distributors and Agents in worldwide Global Distribution Channel
  35. Committed to building impeccable track record and strong relationships for long-term growth… Core Competencies
  36. Dynamic and experienced team in the Group… Key Management
  37. Largely held by Tay family and key management… Notes: (1) Majority held by Tay family and Hia Cheng (GCB CFO) (2) A company under Yang Bhg Dato Dr Mohamad Musa Bin Md Jamil (GCB Chairman) Substantial Shareholders
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