22 August 2012

JB Foods - Recent Result Release

Extracted from result released by the company via SGX.

SINGAPORE, 21 August 2012 – One of the major cocoa ingredient producers in Malaysia, JB Foods Limited (“JB Foods” together with its subsidiary, JB Cocoa Sdn Bhd (“JB Cocoa”), the “Group”), today announced its first set of results since listing on the Mainboard of the Singapore Stock Exchange on 23 July 2012. The Group posted earnings of RM10.5 million on the back of revenue of RM128.4 million for the three months ended 30 June 2012 (“2Q2012”).

On a year-to-date basis, JB Foods achieved a revenue of RM271.6 million and a net profit of RM22.5 million for the six-month period ended 30 June 2012 (“1H2012”). The Group’s revenue was lower yearon- year mainly due to lower cocoa bean terminal prices, which resulted in lower average selling price for its cocoa ingredient products.

In addition, sales quantity decreased by 1,556 tonnes from 23,690 tonnes in 1H2011 to 22,134 tonnes in 1H2012 mainly due to the disruption in production caused by a planned integration of expansion works-in-progress. Nevertheless, despite the lower sales quantity, the Group’s gross profit margin in 1H2012 improved by 2.3 percentage points to 13.7%, from 11.4% in 1H2011.

For the period under review, cost of sales decreased by 23.3% to RM234.3 million in 1H2012, primarily in response to the “pass through effect” of lower cocoa bean terminal prices during the same period. Based on weighted average number of 131,956,024 ordinary shares, earnings per share for 2QFY12 was 7.97 Malaysian sen while net asset value per ordinary share based on pre-invitation share capital of 316,000,000 shares stood at 38.68 Malaysian sen as at 30 June 2012 as compared to 31.57 Malaysian sen as at 31 December 2011.

Interim Dividend 

The Board of Directors of JB Foods is recommending a one-tier tax exempt interim dividend of 1 cent per share.

Prospects 

Going forward, over the next 12 months, the Group expects that the business environment will continue to be challenging as the global economic situation remains uncertain in light of the current Euro Zone debt crisis.

However, barring unforeseen circumstances, the Board remains positive about the Group’s businesses due to the expected increasing cocoa powder demand in Asia. The Group will endeavour to capitalise on this growing demand.

Mr Tey How Keong (郑好强), Chief Executive Officer of JB Foods commented: “The Group places strong emphasis on product development and providing customisation of cocoa ingredient products, especially cocoa powder, to fulfil the varied requirements of our customers. With our technical knowhow and our expertise in blending, we are able to achieve consistency in our products in terms of flavours and colours to produce high quality cocoa ingredient products. This has earned us a strong reputation amongst global customers, who are mainly multinational companies. We believe we are in a good position to grow in tandem with such customers as they extend their presence in key Asian markets such as Indonesia, India and China.”

With the construction of its new production facilities underway, the Group is on track to increase its
production capacity from 60,000 tonnes to 85,000 tonnes, which will progress in stages supported by
customers’ demand.

Use of IPO Proceeds. Source: Company




About JB Foods 

Limited Established since the 1980s, JB Foods is one of the major cocoa ingredient producers in Malaysia with a production capacity of 60,000 tonnes of cocoa bean equivalent per year. We are principally engaged in the production and sale of cocoa ingredient products, namely cocoa butter, cocoa powder, cocoa liquor and cocoa cake, which are used to produce chocolate, chocolate confectionary, as well as cocoa-related food and beverages. Our cocoa processing plant – which is ISO 9001:2008, HACCP, Kosher and Pareve, and Halal-certified – is located at the Port of Tanjung Pelepas, a free trade zone in Johor, Malaysia where all our products are manufactured under stringent food safety standards. Our products are sold primarily under the “JBCOCOA” brand name and we export our products worldwide to customers ranging from international trade houses to end users.

Financial Analysis

Business Model:

Basically the company is a cocoa producers which its products mainly comprise of cocoa powder, cocoa butter, cocoa liquor and cocoa cake. Cocoa powder and cocoa butter are 2 main products which contributed 90% of the group's revenue. It has about 14.6% stake in Malaysia processed cocoa bean market. Basically the company has to perform hedging from the market to lock in the cocoa price and produce it to the end products (e.g. cocoa butter and cocoa powder etc). Nonetheless, it may be offset by the increase of productivity as management intends to increase our annual production capacity from 60,000 tonnes to approximately 85,000 tonnes of cocoa bean equivalent per year by FY2013.



Profitability: 

EPS for 1H 2012 post-invitation share capital would be 25.4M / 400M = RM0.0635 or SGD0.0254, annualized PE (based on 29.5c market shares price) = 5.8x (estimated). With proposed 1C dividend, the dividend yield (based on 29.5c market shares price) = 3.39%


Source: Company

Financial Healthiness:

You may refer to the report released by the company (However this report is for the period prior to IPO). The company still have a healthy financial position:

Current Ratio: 1.15X
Total Term Debt / Equity Ratio:  1.71X
NTA: SGD0.122 (based on post invitation shares capital & 2.5sgd/rm conversion rate)
Annualized ROE = around 40% (I can foresee a further drop of ROE in future, as the company is going to purchase more PPE and reduce it's debt by the cash it raised from IPO).


Price Charts

Since its debut on July this year, the company share price has dropped below its IPO price recently. You may see the price movement from the chart below:

Chart 1: JB Foods stock price. Source: Shareinvestor.com

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