In an unrated report by CGS-CIMB, analyst Ngoh Yi Sin says, “The rising consumption of chocolate by emerging economies and improved consumer awareness is driving the global demand for cocoa, in our view.”
Meanwhile, according to Bloomberg, cocoa bean prices have remained low at US$2,024/mt in 3Q18. This is due to bumper crops from Ivory Coast and Ghana, and the combined cocoa ratio (indicator of processing profitability) that stayed favourable at 3.6 in July 2018.
The group’s management has said that the continuing industry consolidation and the high entry barrier of heavy capital requirements might be possible tailwinds for the company.
The group turned around in FY15, and has since delivered positive net profit growth y-o-y, riding on increasing customer demand and subsiding overcapacity for cocoa processing globally. Although JB Foods’ profit margins may be influenced by a myriad of external factors, such as weather and government intervention, the management aims to achieve double-digit sales volume growth very year and sees opportunities to make market share gains.
In addition, the group has expanded its business by opening offices in Switzerland and China, penetrating deeper into those markets.
As at 11.20am, shares in JB Foods are 63 cents.
