Company Results

• Higher profit - Ajinomoto (Malaysia) Bhd (AMB)’s 4QFY18 net profit dropped 90% YoY to RM14.7m due to absence of RM145m gains from compulsory acquisition of its land and plant for the MRT project. Excluding the one-off gain in 4QFY17, operating profit grew 16% YoY to RM16.6m while PBT increased 18% YoY to RM19m.

• Flat revenue - Quarterly revenue was flat at RM115m as decline in the Industrial product (-8% YoY to RM29.3m) was mitigated by increase in the Consumer products (+3% YoY to RM85.7m).

• Mixed QoQ – Net profit for the quarter dropped 14% QoQ due to absence of tax reversal while revenue rose 5% QoQ as gains in Consumer products (11% QoQ) absorbed the decline in Industrial products (-10% QoQ).

• Stable margin – Compared to the previous quarter, operating margin unchanged at 14% as Consumer product saw increase of 3 percentage points to 14% while Industrial product declined 3 percentage points to 17%.

• For the full year, net profit dropped 70% YoY to RM56.3m due to gains of disposal of land and plant in the previous year. Without the exceptional gain, operating profit declined 4% YoY to RM57.7m but PBT grew 1% YoY to RM67.1m thanks to higher interest income of RM9.9m (vs RM5.5m in FY17). Full year revenue grew 4% YoY to RM436.3m as revenue from Consumer and Industrial segments increased 3% YoY and 7% YoY respectively.

• Cash rich – As at March 2018, AMB is in a net cash position with cash reserve of RM296.7m vs RM281m in 3QFY18. The company announced dividend of 46.5 sen/share policy, translating into a yield of 2.1%. The dividend payment is within our expectation of 48 sen/share.

Comment

• Meeting expectation – Twelve months’ net profit of RM56.3m met our FY18 forecast of RM54m while cumulative sales of RM436.3m hit our full year forecast of RM435m. As such, we are maintaining our forecasts for FY19F and FY20F.

• Risks - Despite dominating the MSG market, AMB faces competition in other food and seasoning products from local brands and overseas producers. The removal of GST could result in lower retail prices but we see little upside due to the inelastic nature of its products.

Valuation & Recommendation

• Maintain HOLD at an unchanged target price of RM22.75 based on 3.1x FY18F price-to-book, implying +1.5

Source: JF Apex Securities Research - 25 May 2018