Going Cocoa

Brandon Tay, CEO of Guan Chong, one of the top 10 cocoa processors in the world, explains the company's upside. It processes beans to make cocoa butter and powder for chocolate makers like MARS and Hershey's. Guan Chong's share price rose more than 5x since two years ago.

Positive points:
1) trading at below P/E of peer, Petra Foods in Singapore 2) market capitalisation close to RM1 billion, and could go up further once it gets into the radar of fund managers 3) on upcycle in terms of expansion of Batam plant 4) dividend policy fixed at 25% of net profit

Risks:
1) Cocoa powder prices may continue to fall due to over-supply of beans unless weather patterns become unfavourable, but Guan Chong does hedge some of its contracts by locking in prices of cocoa beans earlier 2) US dollar rises instead, resulting in a net forex loss