Journey to Wealth
Dutch Lady Milk - OUTPERFORM - 25 May 2012
Period 1Q12
Actual vs. Expectations
The 1Q12 net profit (NP) of RM27.5m was in line with our expectation, making up 24.2% of our estimate of RM113.5m.
Dividends No dividend was announced during the quarter as expected. The company commonly pays twice a year and it usually falls in July and December.
Key Result Highlights
The revenue improved 9% YoY due mainly to the better sales in powder and liquid products. PBT also rose 7% in tandem attributable to the higher sales above and helped also by a better sales mix, with the company having ceased the lowermargin condensed milk production in Sep last year. The bottom line NP, however, fell 3% YoY due to a higher tax bracket of 26% (vs. just 18% in 1Q11).
On a QoQ basis, the revenue was up by 1% on the back of higher sales from powder products. There was, however, a minimal margin squeeze as the company spent higher on marketing expenses in the quarter as compared to 4Q11. According to a media report dated 25 Apr 2012, DLady has actually invested 19% more in its marketing budget this year, as compared to FY11 to celebrate World Milk Day.
Outlook We remain positive on the company's prospect going ahead given its strong brand and market position. Its campaign of 'Drink More Do More ' 2 a Day,' which is an attempt to break the Guinness World Records, could also attract more consumer awareness and spur more sales for the company.
Change to Forecasts
We are maintaining our FY12-13E NP estimates of RM113.5m-RM119.9m.
Rating UPGRADED TO OUTPERFORM
Valuation As the current share price implies a potential total return of 12% to our target price (TP), we are upgrading the rating on DLady from a MARKET PERFORM to an OUTPERFORM. Our TP remains unchanged at RM34.20 based on 19.3x PER on the FY12 EPS.
Risks Global economic uncertainty may impact consumers spending, which will in turn hit the company's earnings.
Source: Kenanga
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