Period

4Q15/FY15

Actual vs. Expectations

FY15 net profit of RM590.7m (+7.3%) was within expectations by matching 97.7% of our full-year forecast and 98.7% of the consensus’ estimate.

Dividends

As expected, a final DPS of RM1.30 was declared, bringing FY15 payout to RM2.60 (FY14: RM2.35), in line with expectations. DPS represents pay-out ratio of 103.2%.

Key Results Highlights

YoY, FY15 revenue inched up marginally by 0.6% to RM4.8b. Gross profit grew 9.7% to RM1.9b thanks to the favourable commodity price and higher operating efficiency, which expanded the gross margin by 3.3ppt to 38.6%. Operating profit growth was slower at 4.9% as the Group reinvested the savings from production costs into marketing activities. Meanwhile, lower effective tax rate of 18.8% (vs FY14: 21.5%) lifted net profit by 7.3% to RM590.7m.

QoQ, 4Q15 revenue fell slightly by 1.6% to RM1.2b on seasonality. Gross profit was flattish at RM459.9m as the Group continued to improve its cost management throughout the value chain. As expected, marketing and promotional expenses was back-loaded in 4Q15, resulting in a steep 40.2% dip in operating profit to RM128.2m. Net profit declined by greater magnitude of 44.3% to RM99.8m due to higher effective tax rate vis-à-vis 3Q15. (15.9% vs 12.7%)

Outlook

We were encouraged by the resilient performance as the bottom line growth of 7.3% was achieved despite the weak consumer sentiment throughout the year thanks to margin expansion from cheaper raw material costs and operating efficiency.

Moving forward, we foresee the subdued trend of commodity price to continue in view of the lacklustre global economy outlook and thus expecting the Group to continue to benefit from that trend. We also anticipate the Group to be committed in marketing and promotional activities in order to stimulate the fragile sentiment and encourage consumer spending.

Change to Forecasts

No changes to FY16E earnings forecast. We introduce FY17E earnings with net profit growth of 5.5%.

Rating

Maintain MARKET PERFORM

Valuation

We maintain our Target Price to RM76.20, based on unchanged PER of 27.1x FY16E EPS, which is in line with +0.5SD over 5-year mean.

Risks

Higher-than-expected operating costs.

Weaker-than-expected consumer sentiments

Source: Kenanga Research - 24 Feb 2016