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21 April 2015 | 1QFY15 Results Review
Maintain NEUTRAL
Nestlé (Malaysia) Berhad
Continues to be domestic centric
Revised Target Price (TP): RM73.04
(previously RM70.55)
INVESTMENT HIGHLIGHTS
•
Nestlé’s 1QFY15 earnings of RM187.9m accounted for
RETURN STATS
30.9% of our full year FY15 earnings forecast
•
Revenue grew by +0.4%yoy due to commendable domestic
performance
•
Both gross profit margin and operating profit margin
benefited from improving commodity prices
•
No dividend was declared as Nestlé typically distributes
Price (20 April 2015)
RM74.48
Target Price
RM73.04
Expected Share Price
Return
-1.93%
Expected Dividend Yield
+3.50%
dividends semi-annually
•
Maintain NEUTRAL with a revised TP of RM73.04 per share
Expected Total Return
+1.57%
Earnings within expectations. 1QFY15 earnings of RM187.9m were
broadly in-line with estimates, accounting for 30.8% and 31.2% of ours
and consensus full year earnings forecasts respectively. Earnings in the
first quarter of the year are historically stronger due to the Chinese New
Year festivity. Additionally, we believe that the stellar 1QFY15 earnings
STOCK INFO
KLCI
1,848.66
were further boosted by pre-GST purchases.
Bursa / Bloomberg
4704 / NESZ MK
Commendable domestic performance. Nestlé registered revenue
Board / Sector
Main/ Consumer
and earnings growth of +0.4%yoy and +2.4%yoy respectively for
1QFY15, which were mainly driven by the performance of its domestic
businesses. This was backed by its “Lebih Nilai, Lagi Hebat” campaign
which was launched at the end of February 2015. However, external
Syariah Compliant
Yes
Issued shares (mil)
234.5
Par Value (RM)
1.00
revenue growth was capped by slower exports to Nestlé’s overseas
affiliates. This was partly due to the gloomy regional demand.
Nonetheless, it should also be noted that the slowing external trend is
Market cap. (RM’m)
17,306.1
Price over NA
showing signs of stabilisation, as the impact was smaller compared to
30.26x
that in 4QFY14.
52-wk price Range
RM63.50 –
RM75.50
Improving commodity prices contribute positively on margin.
Beta (against KLCI)
0.45
3-mth Avg Daily Vol
0.014m
With the exception of palm oil and coffee beans, prices of commodities
have generally eased during the review quarter. This has contributed to
a positive gross profit margin expansion of +1.8ppts. The expansion in
margins was however slightly offset by the depreciation of the Ringgit
against the US Dollars.
Operating profit positively affected. The higher recorded revenue of
RM 1,277.7m drove up operating profit by +3.1%yoy, to RM 250.9m
hence improving Nestlé’s operating profit margin by +0.5ppts to 19.6%.
The continuous investment in marketing activities contributed to
3-mth Avg Daily Value
RM1.04m
Major Shareholders (%)
Nestle SA
72.61
Landsbanki Securities UK
Ltd
9.75
EPF
9.27
stronger brand positioning and market share.
MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK
Kindly refer to the last page of this publication for important disclosures
MIDF RESEARCH
Tuesday, 21 April 2015
No dividend has been declared, but expect an interim dividend next quarter. It has been customary for
Nestlé to declare an interim dividend in the second quarter since FY09.
Maintain NEUTRAL with a rolled-forward TP of RM73.04. We maintain our Neutral stance on Nestlé with a
revised TP of RM73.04, after rolling forward our valuation base-year to FY16. Our valuation is based on the dividend
discount model, assuming 7.5% cost-of-equity and 3.8% long-term growth. As we progress through the year postGST implementation, we expect consumer demand to experience a period of downward adjustment before
normalising. In the meantime, we also believe that Nestlé will be able to sustain its earnings on the back of increasing
production from the new Sri Muda Factory which will be in full operations by August 2015.
Important Note: Our target price and recommendation are dependent on the final confirmation of the 1QFY15
financial results as it was withdrawn from Bursa Malaysia website after it was announced yesterday. In addition, there
will be an investor briefing soon.
INVESTMENT STATISTICS
FYE Dec (RM million)
FY12
FY13
FY14
FY15F
FY16F
4,556.4
4,787.9
4,808.9
5,285.6
5,540.0
Operating Profit
656.9
734.6
724.9
805.9
852.3
Operating Profit margin (%)
14.4
15.3
15.1
15.2
15.4
Pretax Profit
637.7
719.1
701.2
787.1
832.9
Net Profit
505.4
561.7
550.4
608.9
644.4
Net Profit margin (%)
11.1
11.7
11.4
11.5
11.6
EPS (sen)
215.5
239.5
234.7
259.7
274.8
PER (x)
34.6
31.1
29.9
28.7
27.1
Net Dividend (sen)
210.0
235.0
235.0
251.5
261.1
Net Dividend (%)
2.8
3.2
3.2
3.4
3.5
Revenue
Source: MIDFR
DAILY PRICE CHART
Aaron Tan Wei Min|
Norliyana Alia Ahmad Fuad
[email protected]
03-2173 8461
Source: MIDFR, Company
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MIDF RESEARCH
Tuesday, 21 April 2015
Nestlé: 1Q15 RESULTS SUMMARY
Quarterly
FYE Dec (RM m)
1Q14
4Q14
1Q15
YoY (%)
QoQ (%)
Revenue
1,272.7
1,108.8
1,277.7
0.4
15.2
Cost of sales
(799.2)
(731.6)
(779.3)
(2.5)
6.5
Gross Profit
473.5
377.2
498.4
5.3
32.1
(230.2)
(252.5)
(247.5)
7.5
(2.0)
Operating profit
243.3
124.6
250.9
3.1
101.3
Interests costs
(6.5)
(7.5)
(7.2)
11.6
(3.8)
Interests income
2.0
0.3
0.2
(92.3)
(50.3)
Share of profit/(loss) from associate
0.0
0.1
0.4
884.4
460.8
Profit before tax
238.8
117.5
244.3
2.3
107.9
Tax expense
(55.3)
(19.2)
(56.4)
2.0
193.7
Profit after taxation
183.5
98.3
187.9
2.4
91.1
Basic EPS (sen)
78.3
41.9
80.1
2.4
91.1
Gross profit margin (%)
37.2
34.0
39.0
1.8
5.0
Operating profit margin (%)
19.1
11.2
19.6
0.5
8.4
PBT margin (%)
18.8
10.6
19.1
0.3
8.5
PAT margin (%)
14.4
8.9
14.7
0.3
5.8
Tax rate
23.2
16.3
23.1
(0.3)
41.3
Operating Expenses
Source: Company, MIDFR
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MIDF RESEARCH
Tuesday, 21 April 2015
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for
distribution only under such circumstances as may be permitted by applicable law.
Readers should be fully aware that this report is for information purposes only. The opinions contained
in this report are based on information obtained or derived from sources that we believe are reliable.
MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or
implied, as to the accuracy, completeness or reliability of the information contained therein and it should
not be relied upon as such.
This report is not, and should not be construed as, an offer to buy or sell any securities or other
financial instruments. The analysis contained herein is based on numerous assumptions. Different
assumptions could result in materially different results. All opinions and estimates are subject to change
without notice. The research analysts will initiate, update and cease coverage solely at the discretion of
MIDF AMANAH INVESTMENT BANK BERHAD.
The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have
interest in any of the securities mentioned and may benefit from the information herein. Members of the
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whose securities are mentioned herein This document may not be reproduced, distributed or published
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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Total return is expected to be <-15% over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
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