Journey to Wealth
Nestle (M) Berhad 1H12 results in line
Period 2Q12/1H12
Actual vs. Expectations The 1H12 net profit (NP) of RM278.6m was in line with expectations, making up 56.5% and 57.8% of the street's FY12E NP of RM492.7m and our RM482.1m respectively.
Dividends A RM0.55 interim dividend per share (DPS) was declared in 2Q12 as expected. (Ex-date: 18/9/2012). Another RM1.35 DPS is expected to be declared in 4Q12, bringing to a total DPS of RM1.90. This will translate into dividend yield of only 3.0%.
Key Result Highlights QoQ, NP dropped 23.8% to RM120.5m despite a marginal dip of 1.3% in revenue. Profit margins were lower QoQ due to higher marketing and promotional activities. Note that these activities are typically more concentrated in 2Q.
YoY, the 2Q12 revenue increased 10.5% despite the flat export sales. This was mainly due to the robust double-digit domestic sales growth in confectionery, Nestle liquid drinks, chilled dairy and ice-cream products, which were mainly driven by its effective consumer marketing. Despite the higher marketing expenses spent in conjunction with Nestle Malaysia's 100-year celebration, 2Q12 PBT still rose 12.7% YoY as stronger sales in the quarter more than offset the higher marketing expenses. Moreover, NP jumped even higher with a stronger YoY growth of 22.5% owing to a lower tax bracket.
Due to the above-mentioned factors, 1H12 revenue and NP also improved by 9.5% and 13.5% YoY, respectively.
Outlook We continue to see potential sales growth opportunities for the company driven by the company's product innovation and marketing investment as well as its role on the global stage as the Halal Centre of Excellence for Nestle Global.
Change to Forecasts Maintaining our FY12-13E NP of RM482m-RM508m.
Rating Maintain MARKET PERFORM
Valuation Revised our TP on Nestle upwards to RM67.50 (from RM58.00 as per our DCF Model previously) based on a PER valuation of 31.2x over FY13 EPS of 216.2sen (see overleaf for details).
Risks 2H12 will be more challenging as there are a number of uncertainties which are affecting the global economic growth and driving volatilities in the commodity prices.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
