Dear friends of i3 Forum

We have posted and warned about Overpaying for Nestle 

See Nestle's Latest Result

Refer Bursa

Above we see a drastic drop of profit from 77.15 sen to 39.91 sen (YoY)

A drop of 48.2% (that is huge)

Its NAV only Rm2.83

Nestle does not have NTA support as Margin of Safety

Its Margin of safety is in its Milo & Maggee Mee which captures up to 80% of Malaysia preferred drinks & staples

And It people trust its High Consistent Dividend as a Margin of Safety

But even so

The price they paid is just over much

At its peak Nestle reached Rm154.00 per share

Now let us calculate its P/E

At 39.91 sen this Qtr

Annualized 39.91 X 4

= Rm1.5964

At Rm100.60

Its P/E is 100.6/1.5964

= 63.01 P/E

It will take you 63 Years to see your money double in 63 years

In that case it is better to put your money in Bank FD for 3% interest

100/3

= 33.3 P/E

That means putting your money in Bank FD will double your money in only 33.3 years compared to Nestle (63 years)

Why Nestle cannot grow unlike Coca Cola of USA?

Answer:

In USA Coca Cola has a World Market

After Coca Cola Expanded to all States in USA it starts to export to few hundred countries all over the World

USA only 330 Million Population: World Population is 8 BILLIONS

See How Big is Coca Cola Market

Now Nestle Market is only confined & Limited to Malaysia 33 Million People

Malaysia populaton of 33 Million people is only 10% of USA 330 Millon People

And Nestle Products cannot be sold or exported to other Countries as each country got their Own Nestle Products

Recently we visited Japan

See Japan Nestle

​

KitKat Wasabi - Nestlé

Now we also visited Wasabi Farm in an earlier trip to Japan

Wasabi is grown in Clean running stream

Water is cold & stream very pure and unpolluted

Malaysia can never grow its Wasabi by virtue of its different climate

We also Visited Thailand

​

We also visited Taiwan

​

パイナップル味のキットカット Pineapple KitKat

And Taiwan pineapple is among the Very Best

Even its Stem is very soft and melt in our mouths

So we ate pineapples every time we saw them

But quite expensive (3 times higher in price than Malaysia Pineapple)

Also in Singapore & Australia they have their Own Milo Brand with Australian Formula

​

So we have shown you why Nestle is now too pricey and will see long term underperformance due to its HIGH OVERVALUATION

Last time Dlady reached Rm76.00 in high valuation

For the same reason Dlady has a very localized market of 33 million consumers its share is also HIGHLY OVERVALUED

Now is the best time to take profit in both & move on

More so

Why?

Answer

In Peninsular Recently there is a Diesel Price hike of 52%

I met a guy driving a Toyota Hilux Diesel

Before price hike it cost Rm180 to fill up his Tank

After price hike?

It's Rm250

In Malaysia Lorries & Milk Trucks all use Diesel for Transport

As such in future Qtrs both Nestle and Dlady will see further Margin erosion

With Kind Regards

Calvin Tan

Please buy or sell after doing your own due diligence or consult your Remisier/Fund Manager