GCB: Earnings Improved On Increased Sales Volume & Higher Profit Margins

Results Update

For QE31/12/2021, GCB's net profit rose 49% q-o-q or 8% y-o-y to RM51 million while revenue rose 9% q-o-q or 6% y-o-y to RM1.088 billion. Revenue rose y-o-y mainly due to increase in sales volume of cocoa products. Profits rose mainly due to improved margin.


Table: GCB's last 8 quarterly results


Graph: GCB's last 69 quarterly results

Financial Position

As at 31/12/2021, GCB's financial position is deemed fair while current ratio at 1.49 times and gearing ratio at 1.58 times. The high gearing was due to the suppliers' credit and bank borrowings taken to finance high inventory. The increase in inventory is attributable to weaker demand for cocoa butter in Europe and America. Cocoa butter is used in the production of chocolate, which has seen a drop in demand due to the pandemic. 

Valuation

GCB (closed at RM3.05 yesterday) is now trading at a trailing PER of 20 times (based on last 4 quarters' EPS of 15.03sen). At this PER, GCB is deemed fairly valued.

Technical Outlook

Since the start of 2021, GCB has been trading sideways between RM2.60 and RM3.20. Until a breakout is attained, GCB is expected to be range-bound.


Chart : GCB's weekly chart as at Feb 21, 2022 (Source: isaham.my)

Conclusion

Despite the improved financial performance, GCB will likely remain in a dull holding pattern until a technical breakout is attained. 

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.