Following the credit update article that we published on 14 July 2025, JB Cocoa is now targeting to tap into the MYR bond market, with an indicative yield of 5.30%-5.50%.
Credit Update: Cocoa grinders continue to benefit from the volatile bean prices – JB Cocoa
Outstanding performance in FY2025
The elevated cocoa bean price has led to a tremendous surge in JB Cocoa’s revenue in FY2025 (15 months ended March 2025), representing a 178.2% increase to approximately USD 1,658 million.
However, in tandem with the higher revenue, the group’s cost of sales and finance costs rose by around 180% and 127% respectively
Despite the exceptionally strong revenue recorded during the financial year, JB Cocoa’s net margin remained thin at 1.4%. This was primarily attributed to persistently high cocoa bean prices, coupled with strengthening foreign currencies, which resulted in translational foreign exchange losses when translating back to USD.
We expect JB Cocoa’s net margin to remain thin in FY2026, given that cocoa bean prices are unlikely to return to the previous low level of USD 3,000/MT imminently
JB Cocoa recorded an improved balance sheet despite the prolonged volatility in cocoa bean price
In FY2025, the group managed to pare down its total borrowings by approximately USD 74 million. Total Debt/EBITDA saw significant improvement, decreasing from 11x in FY2023 to 2.6x in FY2025, underpinned by strong earnings growth.
While the group’s cash and bank balances seem insufficient to meet its short-term obligations of approximately USD 44 million, we believe the group’s credit profile remains healthy, considering its marketable assets (receivables + inventories) are more than sufficient to fulfil its short-term obligations.
Key risks
Supply chain issue: Supply chain disruptions due to the adverse weather conditions may have a negative impact on the group’s financials and credit metrics.
Fluctuation in cocoa bean prices and foreign exchange risks: Highly volatile bean prices environment and foreign exchange movements may impact the group’s financials negatively.
Our view on the upcoming issuance - 5Y (indicative yield guidance 5.30%-5.50%)
JB Cocoa is targeting to raise RM150 million (indicative issuance size) via a bond issuance in the Malaysian market.
After taking into consideration the upcoming issuance, JB Cocoa’s gearing ratio is expected to rise to around 96% (FY2023: 153%). The bond proceeds will be used to repay existing debts and for working capital requirements.
Given JB Cocoa’s strong and supportive customer base (such as Mars, Nestlé, Hershey’s, Mondelez and others), coupled with its strategic cost pass-through model to transfer additional costs to clients, we are of the view that JB Cocoa will be able to maintain its profitability, and also its healthy credit and liquidity profile going forward.
Investors may consider the upcoming issuance, as we believe the indicative yield is relatively appealing within the MYR bond space: JBCOCO Aug2030, indicative yield guidance 5.30%-5.50%
Bond info:
Target Issue Size: Up to RM125 million
Bond Credit Rating: A+
Min / Sub Nominal Amount: MYR 25k / 5k (To be onboarded on Wholesale Bond Express)
Target Pricing (Book Close): As early as week of 11th Aug 2025 (subject to market conditions)
Table 1: Existing Bonds
|
Bonds |
Years to Maturity |
Yield to Maturity |
|
4M |
3.99% |
|
|
1Y4M |
4.98% |
|
|
1Y8M |
5.08% |
|
|
2Y4M |
5.20% |
|
|
4Y4M |
5.40% |
Source: BSM, iFAST compilations. Data as of 01 August 2025
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.
