In this How to Invest video, I’ll cover Guan Chong Berhad, the 4th largest cocoa grinder in the world as they are moving up the …
Kilang perindustrian Johor hiring
#Invest #Guan #Chong #Berhad
In this How to Invest video, I’ll cover Guan Chong Berhad, the 4th largest cocoa grinder in the world as they are moving up the …
Kilang perindustrian Johor hiring
#Invest #Guan #Chong #Berhad
What's your favourite chocolate brand?
Hi John, I just watched your video (with 3 months late). I like GCB because I worked for them last year (I taught French to their Malaysian/Indonesian employees before they move to Ivory Coast). I was very confident in the company however recently I have big doubt concerning their expansion in Germany since the importation of (cheap) Russian gaz is stopped, many companies in Germany are shutting down (and moving to USA) due to high increase in the cost of energy (+40% since sanctions on Russia). Will they be able to bare this cost to maintain operation in Germany?
GCB has a wonderful story, a high growth story as narrated. A growth story must be justified with some numbers. For a traditional consumer business, I like the growth to be accompanied by two important metrics, cash flows and return on capital. Cash flows had been poor from 15 years ago, not only recently with expansion and acquisitions, which will further adversely affecting cash flows. Return on capitals is just mediocre in the last 10 years, mostly in single digits. Of course, that doesn't mean these won't improve in the future.
Looking at the cash flows, and particularly the free cash flows over a period of time, 5 years, 10 years, GCB does not impress me. Listening to the risks you have mentioned, and coupled with the cash flows concern, I will not touch this stock. I have been wrong on GCB 5 years ago on the same concerns, but I still will not touch it.
GCB was one of my favorite portfolio back in 2019. as contrary to other manufacturing sector , higher inventory indicate higher sales , as all raw material with the company is considered as contractually sold.
i agree that going to ivory coast is a risk . but west africa offers best bean quality. some insider info, its a local industry taboo for a grinder to get involved directly downstream consumer products, hence they sold the fuji oil malaysia. but for product portfolio expansion, going to europe directly can complement the ivory coast plant , through forming a full product chain along the line.
as for grinding industry , there are some unwritten practices from the big 4
1. no reckless expansion , as happened to glove industry.
2. achieve multi-poly whenever possible, to ensure long term profitability.