Bullbear Buffett : Nestle Malaysia

Monday, 8 June 2026

Nestle Malaysia

The income statement data places Nestlé Malaysia in a cyclical recovery phase, rebounding from the earnings trough of 2024 as volume trends improve and input cost pressures moderate.

Nestlé (Malaysia) Berhad is a Malaysian food and beverage manufacturer, majority-owned by Nestlé S.A., headquartered in Petaling Jaya. The company's extensive product portfolio covers virtually every category in the modern grocery aisle: instant coffee (Nescafé), instant noodles and culinary products (Maggi), powdered malted beverages (Milo), confectionery (Kit Kat), ice cream (Drumstick, La Cremeria), dairy and powdered milk (Nespray, Nestum), cereals (Koko Krunch, Honey Stars), ready-to-drink beverages, and nutrition products including infant and toddler formulas (Cerelac, Lactogrow). Nestlé Malaysia operates in two primary segments: Food & Beverages is the dominant revenue driver, while the Others segment encompasses Nutrition, Nestlé Professional (foodservice), Nestlé Health Science, and Nespresso. Geographically, Malaysia remains the core market (approximately RM4.8 billion in 2024), complemented by a significant export business of around RM1.4 billion, reflecting the company's role as Nestlé Group's largest halal manufacturing hub.

Over the five-year period from 2021 to 2025, revenue exhibited a pronounced cyclical trajectory. Following a period of strong growth—+16% in 2022 and +6% in 2023—the company experienced a sharp reversal in 2024, with sales declining 12% to RM6.23 billion. This contraction was largely attributed to weak consumer sentiment and inflationary pressures weighing on household purchasing power. However, 2025 marked a clear recovery, with revenue rebounding to RM6.88 billion, representing +11% year-on-year growth, driven by firm domestic demand, double-digit export growth, and the fading impact of earlier consumer boycotts on certain Western brands. Gross profit margin remained relatively stable in the 30% range, but operating leverage worked against the company during downturns. EBIT margin compressed sharply from 15.2% in 2023 to 11.3% in 2024, reflecting the combined impact of lower revenue and relatively fixed operating costs. The rebound in 2025 saw EBIT recover to RM796 million (margin ~11.6%), but this still trails 2023 levels. Net income trajectory is particularly stark: after peaking at RM660 million in 2023, net profit collapsed 37% to RM416 million in 2024, before recovering 23% to RM513 million in 2025, translating to EPS recovering from RM1.77 to RM2.19 over the same period.

Cost of Goods Sold including D&A tracked closely with revenue, ranging from 70% to 73% of sales over the period. COGS fell to RM4.34 billion in 2024 in line with lower sales, then rose to RM4.79 billion in 2025 as volumes recovered. Notably, COGS growth generally mirrored revenue growth, suggesting that cost pass-through remains a key mechanism for managing margin integrity, though timing lags can create interim margin pressure when raw material costs spike. SG&A expense has been on a steady upward trajectory, rising from RM1.09 billion in 2021 to RM1.29 billion in 2025. The 9.3% growth in SG&A in 2025—proportionally less than revenue growth—demonstrated some operating leverage benefit during the recovery. Interest expense rose modestly over the period, from RM36 million in 2021 to RM61 million in 2025. The effective tax rate varied between 21% and 26%, with 2024's rate of 23.7% and 2025's rate of 26.7% both having meaningful impacts on net income conversion.

The quarterly progression within 2025 reveals the shape of the recovery. Q1 2025 revenue was RM1,768 million with net income of RM161 million (EPS RM0.69). Q2 2025 saw revenue decline 5.7% to RM1,668 million and net income fall to RM112 million (EPS RM0.48). Q3 2025 revenue rebounded 5.6% to RM1,762 million with net income of RM114 million (EPS RM0.49). Q4 2025 revenue was RM1,682 million, down 4.6%, but net income improved to RM126 million (EPS RM0.54). Q1 2026 then registered a significant acceleration, with revenue jumping to RM1,880 million (+11.8% year-on-year) and net income surging 63% to RM205 million (EPS RM0.87), suggesting that recovery momentum continued to build into the new fiscal year. One notable quarterly feature is EBITDA volatility: Q1 2025 EBITDA of RM296 million fell to RM231 million in Q2, rebounded to RM261 million in Q3, contracted again to RM210 million in Q4, then surged to RM314 million in Q1 2026. This unevenness reflects both underlying demand fluctuations and the timing of promotional and distribution activities.

Looking ahead, analyst consensus points toward a continued recovery trajectory. Nestlé Malaysia is forecast to grow earnings and revenue by approximately 7–8% per annum over the next several years. Management expects growth momentum to remain firm into FY2026, supported by sustained export strength, easing input costs, and continued fiscal support for consumers (including SARA cash aid payments and tourism-related spending ahead of Visit Malaysia 2026). Key tailwinds include stabilising commodity costs—cocoa prices have eased from their peaks, while a stronger Malaysian ringgit helps offset imported raw material cost pressures. However, coffee bean prices remain volatile and well above historical averages, posing a persistent risk to margin recovery. Risks to this outlook include structurally higher input costs for key commodities (particularly coffee), potential consumer downtrading if inflation remains elevated, and the possibility that current valuations may already have priced in much of the anticipated recovery. The company's shares trade at a substantial premium to historical averages, with a price-to-earnings ratio of approximately 38x normalized earnings.

In conclusion, Nestlé Malaysia has navigated a challenging period of consumer spending weakness and boycott-related headwinds, emerging with a clear recovery trajectory evidenced by improving quarterly results through 2025 and into early 2026. The company's entrenched brand portfolio, dominant market positions across multiple categories, and role as Nestlé's global halal manufacturing hub provide structural advantages, though margins remain below peak 2023 levels and input cost volatility continues to warrant careful monitoring.

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My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

Bullbear Buffett

Monday, 8 June 2026

Nestle Malaysia

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All equity security investments present a risk of loss of capital

The Ultimate Hold-versus-Sell Test

Some thoughts on Analysing Stocks (KISS)

Benjamin Graham

Sell the losers, let the winners run.

Investment Style

Warren Buffett

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