Highlights

PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 22 Oct 2021, 11:22 AM

 

DKSH Holdings (M) Berhad - Earnings Growth Supported By Margin Expansion

Author:   |    Publish date:


We came away from our recent meeting with DKSH feeling reaffirmed on its future growth prospects. This is mainly underpinned by the expected recovery in the consumer spending following the reopening of business activities in the economy. In addition, we believe that the favourable product mix and better operational efficiencies will continue to support DKSH’s profit margins moving forward. We maintain our Outperform call on DKSH with a higher TP of RM6.00 (previously RM5.00) based on an 11x multiple to FY22F EPS. We ascribe a slightly higher multiple to its 5-year historical average of 10x as we are anticipating better earnings growth on the back of higher net profit margins, mainly due to better operational efficiencies and the stronger profit contribution from its own brands. We are forecasting an average net profit margin of 1.2% for FY21-23F as compared to its 5-year historical average of 0.8%.

  • Anticipating stronger sales going forward. We are expecting demand for Marketing and Distribution (M&D) segment to improve in 2HFY21, following the gradual reopening of the economy as more than 80% of Malaysia’s adult population has been fully vaccinated. This should also bode well for the distribution channels for the hotels, restaurants and cafes (Horeca) segment that was affected by the Covid-19 related movement restrictions. While the distribution for the healthcare products has been negatively affected by the lower footfall in hospitals, we think that patient volume will likely to pick up post reopening.
  • Favourable product mix and improved operational efficiencies to maintain profit margins. DKSH is slowly reaping the benefits from its internal efficiency project, which saw its 1HFY21 EBIT margin improve to 2.3% from 1.6% in 1HFY20 given the better operational efficiencies. In addition, the better margin mix given the higher contribution from its in-house brands should continue to support its M&D segment margins. Moving forward, DKSH remains committed to further improve on its operational efficiencies and working capital management.
  • Outlook. While 3QFY21 will likely be weaker QoQ due to seasonality, we are expecting consumer demand to pick up in 4QFY21 amid festive spending. Meanwhile, we understand that the group is looking to take advantage of the lower interest rate environment by paring down some loans that it took to finance for Auric’s acquisition previously. As such, it should likely translate to lower finance cost moving forward.

Source: PublicInvest Research - 28 Sept 2021

Share this
Labels: DKSH

Related Stocks

Chart Stock Name Last Change Volume 
DKSH 6.00 +0.19 (3.27%) 400,700 

  Be the first to like this.
 
calvintaneng Dksh is distributing for delfi and others

Chocolates, biscuit and food products which are full of palm oil

If dksh sells well then palm oil will also do very well
29/09/2021 1:40 AM


TOP ARTICLES

1. Benefits of having a dog - Koon Yew Yin Koon Yew Yin's Blog
2. Shipping & Logistic Industry - SonicShares' global shipping ETF has returned 13% to investors EagleEyed - Win Big Trend
3. PELIKAN (5231) An Asset Play now unlocking its Value by Asset Disposal and giving out 20 Sen Special Dividend, Calvin Tan THE INVESTMENT APPROACH OF CALVIN TAN
4. CPO Prices Flying High BFM Podcast
5. BursaRangers Daily Technical Picks (21 October 2021) BursaRangers Daily Technical Picks
6. BursaRangers Daily Technical Picks (22 October 2021) BursaRangers Daily Technical Picks
7. Mplus Market Pulse - 22 Oct 2021 M+ Online Research Articles
8. THE DAYS OF CHEAP PALM OIL MIGHT BE OVER FOR GOOD JUST BY LOOKING AT HISTORIC CRUDE OIL PRICE CHART, Calvin Tan Research THE INVESTMENT APPROACH OF CALVIN TAN
APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View candlestick stock charts with Technical indicators
MQ Affiliate
Be rewarded by being an MQ Affiliate
 
 

372  458  635  824 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 SERBADK 0.35-0.02 
 SAPNRG 0.1050.00 
 VC 0.09+0.01 
 OPCOM 1.30+0.17 
 JADI 0.105-0.005 
 KNM 0.225+0.005 
 NWP 0.29-0.005 
 THETA 1.31+0.17 
 HIAPTEK 0.635-0.015 
 MYEG 1.040.00 
PARTNERS & BROKERS