Consumer stocks emerge winners in 2016

Saturday, 31 December 2016

Consumer stocks emerge winners in 2016

BY TEE LIN SAY

Counters brave the storm and stand out for their resilience in earnings

FBM KLCI Top 20 Gainers

IN a year which saw the ringgit depreciate by some 10% and oil prices continued to languish, it was the evergreen consumer stocks which braved the storm and stood out for their resilience in earnings.

The top performer for the FBM KLCI was Dutch Lady Milk Industries Bhd.

Other food and beverage players such as Fraser and Neave Holdings Bhd (F&N) and Nestle (M) Bhd were also favourites with the investors, as all have benefited from the subdued commodity prices for the past two years. Collectively, their gross profit margins have widened for seven consecutive quarters from the fourth quarter of 2014 to the second quarter of 2016.

Another consumer and multi-level marketing player which made the cut was Hai-O Enterprise Bhd, which has seen improved sales from new products, higher recurring sales and an increase in monthly recruited new members.

For the second quarter ended Oct 31, Hai-O recorded 35.6% higher revenue of RM99.78mil and 78% increase in net profit of RM15.91mil.

Sole bank Public Bank Bhd made the cut, once again demonstrating its ability to generate stable profitability even when the operating environment remains challenging.

Public Bank’s net profit rose marginally by 3.1% to RM1.24bil in the third quarter ended Sept 30 compared with the same quarter last year, due mainly to higher net interest income and income from the Islamic banking business.

Two plantation companies made the list – Kuala Lumpur Kepong Bhd and United Plantations Bhd, not surprising given that sentiment in the sector has improved. Local crude palm oil prices are trading above RM3,000 per tonne and palm oil inventory levels have fallen to about 1.7 million tonnes, making this supportive for palm oil prices.

A new entrant to the list is Ekovest Bhd, which has attracted investors for its plans to make a special payout to shareholders of up to RM244mil, or 25 sen a share. Ekovest has hogged headlines since it announced its intention to dispose of a 40% stake in phases one and two of the Duta-Ulu Kelang Expressway (Duke) to the Employees Provident Fund for RM1.13bil.

FBM KLCI Top 20 Losers

The downstream oil and gas players and the rubber glove players were quite certainly the worst performers of 2016.

Investors sold down shares of Shell Refining Co (Federation of Malaya) Bhd, Petronas Dagangan Bhd and Petronas Gas Bhd (PetGas) on the back of unexciting earnings, forex losses and higher costs.

Generally, analysts are less enthusiastic on the outlook of Petronas Dagangan, as the domestic marketing arm of Petronas faces higher costs and weak consumer sentiment.

Meanwhile, PetGas continued to incur unrealised forex losses for its US-dollar finance lease liabilities, although this has now reduced from the previous year.

Not surprisingly, UMW Holdings Bhd was a big loser due to its oil and gas division, which has been badly hit by exceptional impairments and very low utilisation of its rigs.

Then there is Axiata Group Bhd, which has operations in 10 countries, and has seen competition rise in almost all the markets it operates in. Hence it needs to incur more capital expenditure which has thus put pressure on its profits.

The rubber glove players that were most sold down were Kossan Rubber Industries Bhd and Hartalega Bhd because of the price war on glove products. The industry as a whole will continue to be impacted by higher production cost, especially with the recent increase in minimum wage.

Nonetheless, glove makers are poised to record sequentially stronger earnings on improved supply-demand dynamics and a more favourable operating environment due to the weak ringgit.

SAM Engineering & Equipment (M) Bhd was another loser, probably because of the expansion cost it requires for its new RM100mil production facility in Bukit Minyak, Penang. Results over the last year have been weaker mainly on new projects start-up costs and foreign exchange movement.

SAM is building a new plant on a four-acre site in Bukit Minyak to produce nacelle beams for the new Airbus A320neo aircraft.

Read more at http://www.thestar.com.my/business/business-news/2016/12/31/consumer-stocks-emerge-winners-in-2016/#B3642WxMflb6TKbh.99

Nestle eyes RM500mil in e-commerce sales

Friday, 28 April 2017

BY S. PUSPADEVI

Chief executive officer Alois Hofbauer(pic) said Nestle has tripled its e-commerce sales in 2016 versus 2015.

KUALA LUMPUR: Leading food and beverage player Nestle (M) Bhd is optimistic of achieving RM500mil in e-commerce sales in the next three to five years backed by the rapid expansion in the digital space.

Chief executive officer Alois Hofbauer said Nestle has tripled its e-commerce sales in 2016 versus 2015.

“We started our e-commerce store sometime in 2015 using Lazada’s and 11th Street’s platform and ever since then we are witnessing rapid expansion in this space.

“Going by this, we might achieve the RM500mil sales target in the e-commerce space faster in the next three to five years,” Hofbauer said during a media briefing after Nestle’s 33rd AGM yesterday.

While many firms had sacrificed brand investment last year in the surface of a subdued consumer sentiment, he said Nestle was aggressive and invested 50% more in marketing and branding to deliver growth.

“This has somewhat given us stronger earnings and revenue in the first quarter ended March 31, 2017,” he noted.

That said, Nestle does not intend to reduce its advertising expenditure (adex) in print, television or radio, but will go all out in marketing in the digital space, going forward.

In 2016, the company was ranked top three among advertisers in Malaysia with close to RM500mil in adex.

On capital expenditure (capex), he said the company will be allocating RM200mil for capex this year, from RM123mil last year.

“This will be spread equally in all product categories, including refurbishing our warehouse,” he said.

Meanwhile, Nestle’s improved operational efficiency in its facilities and supply chain as well as its strategy to fuel, innovate and transform will help mitigate the impact of higher commodity prices and weaker ringgit.

“Year-on-year, we have worked on optimising end-to-end processes.

“Despite the rising raw material prices, we have lowered conversion costs and this has enabled us to maintain our pricing structure.

“We have also generated close to RM200mil in savings to be re-invested into growing the business,” he added.

For the first time in history, Nestle reached the RM5bil sales target, driven by domestic and export sales.

Nestle booked a 4.4% hike in net profit to RM230.43mil for the first quarter ended March 31, 2017, from RM220.68mil, a year ago on the back of a 4.4% rise in revenue to RM1.37bil from RM1.33bil.

The stellar performance was driven by both domestic and export sales, which grew 4.7% and 3.6%, respectively.

On whether the company will increase prices of products, Hofbauer said it will only consider revising prices in a sensible manner depending on the usage of raw materials.

However, this will be Nestle’s last resort, he concluded.

Read more at http://www.thestar.com.my/business/business-news/2017/04/28/nestle-eyes-rm500mil-in-ecommerce-sales/#8uMR5qXGj7PRPT2c.99

Nestle Malaysia at a Glance

http://www.thestar.com.my/business/business-news/2016/08/06/strong-following-for-consumer-stocks/

Breaking the Slow-Growth Myth of Consumer Staple Companies

By Stanley Lim Peir Shenq, CFA - March 29, 2016 

---

• 0
  inShare

Some investors think that consumer staple companies are slow-growing, lumbering companies whose stocks do not provide much opportunity for high capital gains. They may be wildly mistaken.

To show why that’s so, let’s take a look at two large consumer staple companies that are listed in Singapore and Malaysia. They are Thai Beverage Company Limited (SGX:Y92)and Nestle (Malaysia) Berhad (KLSE:4707.KL).

Thai Beverage produces and distributes alcoholic beverages, non-alcoholic beverages, and snacks mainly in Thailand. Nestle (Malaysia), on the other hand, is a food and beverage conglomerate that sources the bulk of its revenue from Malaysia.

If you had invested in either of them over the past 10 years, you would have at leastquadrupled your money as the following table makes clear.

Source: S&P Global Market Intelligence

More importantly, the duo’s stock market returns have been backed by solid growth in their underlying businesses as well. You can see this in the table below:

Source: S&P Global Market Intelligence

A company would see its profit more than double over 10 years if its profit is growing at a CAGR of 8.0%; both Thai Beverage and Nestle (Malaysia) have bottom-lines which had climbed at rates faster than 8.0% per year.

Investors who have the impression that consumer staple companies are a bunch of slow-growing and boring companies may want to rethink that assumption. If a tripling of my investment every 10 years is considered boring, I can seriously live with that.

https://www.fool.sg/2016/03/29/breaking-the-slow-growth-myth-of-consumer-staple-companies/

My equity bond (Nestle)

Nestle Malaysia

Latest after-tax ttm-EPS is $2.39 per share

Nestle's underlying earnings are so consistent.

And Nestle is growing its earnings at about 8% per year.

A company with a durable competitive advantage, over time, the stock market will price the company's equity bonds or shares at a level that reflects the value of its earnings relative to the yield on long-term risk free interest rate.

Capitalized at the risk free interest rate of 3.5%, Nestle's after-tax earning of $2.39 per share is worth approximately $68.30 per equity bond/share.  ($2.39/3.5% = $68.30).


Here is a difference worth noting. 

Nestle is worth $68.30 per share  and it is trading today at around $68.00.  Therefore, for the Graham-based value investors, who wants to buy only at $40 per share, Nestle is not "undervalued"

But for those who are willing to apply their reasoning or thinking cap, just take a look at this scenario.

1.  You are being offered a relatively risk-free initial after-tax rate of return of 3.5% today when you buy at $68.30 sen per share.

2.  This after-tax rate of return is expected to increase over the next 20 years at an annual rate of approximately 8% per year.

3.  Then ask this question:  Is this an attractive investment given the rate of risk and return on other investments?

4.  What other attractive investment give the rate of risk and return of this nature?




I bought a long time ago at $10.20 per share

Thus, Nestle is my equity bond or share that is currently giving an after-tax yield of 23.4% ($2.39 / $10.20 = 23.4%) that is relatively risk-free and which is expected to increase over the next 20 years at an annual rate of approximately 8%. 

Nestle M’sia included in DJSI emerging markets index

Posted on October 31, 2013, Thursday

KUALA LUMPUR: Nestlé Malaysia has been included in the 2013 Dow Jones Sustainability Emerging Markets Index (DJSI Emerging Markets), for its commitment to transparency and sustainability practices.
Nestlé Malaysia managing director and region head for Malaysia/Singapore, Alois Hofbauer, said the company’s inclusion in the index is testimony to its continuous efforts to be more transparent and sustainable, and demonstrates to Nestle’s stakeholders that it is moving in the right direction.

“In 2013, Nestlé Malaysia ranked higher than the industry average in four specific areas including Codes of Conduct/Compliance/Corruption and Bribery; Environmental Policy/Management System; Environmental Reporting, Genetically Modified Organisms; and Human Capital Development, Social Reporting.

“More importantly, the index provides us with a perspective on where we stand in terms of transparency and sustainability with respect to international benchmarks, and provides us with insights in the areas that we need to further improve,” Hofbauer added.

The DJSI Emerging Markets is designed for investors seeking an emerging-markets index that exhibits a sustainable tilt while minimising country, industry and size biases relative to traditional emerging-markets benchmarks.

A total of 81 companies participated in the index, which was first calculated in February 2013 by investment specialsit RobecoSam and covers the top 10 per cent of the largest 800 companies in 20 emerging markets, with Nestlé Malaysia being one of only five Malaysian companies qualified to be included.

It is also the only Malaysian representative among three companies globally in the Food Products category. — Bernama


Read more: http://www.theborneopost.com/2013/10/31/nestle-msia-included-in-djsi-emerging-markets-index/#ixzz2jy91Vjsc

Consumer Stocks on my radar screen

Carlsberg
Guinness
Nestle
Dutch Lady
Hup Seng Industries
Padini
Zhulian


Carlsberg

ROE 64.08%
EPS CAGR 5 Yrs 19.5%
DY High 5.2% - Low 3.6%
D/E 0.02
Revenues Growing last 3 Years
Earnings Growing last 3 Years
LFY Revenues 1584.78 m
LFY Earnings 191.63 m
Gross Margin 36.26%
Market Cap RM  4353.85 m
Shares (m) 305.75
Per Share price RM  14.24
P/E 22.7
DCA Strong


Guinness

ROE 54.62%
EPS CAGR 5 Yrs 13%
DY High 7.1% - Low 4.1%
D/E 0.53
Revenues Growing last 3 Years
Earnings Growing last 3 Years
LFY Revenues  1623.69 m
LFY Earnings 207.40 m
Gross Margin 33.70%
Market Cap  RM 5437.76 m
Shares (m) 302.10
Per Share price RM 18.00
P/E  26.2
DCA Strong


Nestle

ROE 67.27%
EPS CAGR 5 Yrs 11.6%
DY High 4.0% - Low 3.1%
D/E 0.13
Revenues Growing last 3 Years
Earnings Growing last 3 Years
LFY Revenues 4556.42  m
LFY Earnings  505.35 m
Gross Margin 34.09%
Market Cap  RM 14,252.91 m
Shares (m)  234.50
Per Share price RM  60.78
P/E 28.2
DCA Strong


Dutch Lady

ROE 57.08%
EPS CAGR 5 Yrs 21.2%
DY High 6.3% - Low 3.6%
D/E 0.00
Revenues Growing last 3 Years
Earnings Growing last 3 Years
LFY Revenues  882.18 m
LFY Earnings 123.38  m
Gross Margin 58.18%
Market Cap  RM 3101.44 m
Shares (m)  64
Per Share price RM  48.46
P/E 25.1
DCA Strong


Hup Seng Industries

ROE 21.24%
EPS CAGR 5 Yrs 46.9%
DY High 11.0% - Low 7.3%
D/E 0.00
Revenues Growing last 3 Years
Earnings Growing last 3 Years
LFY Revenues 247.82  m
LFY Earnings 32.54  m
Gross Margin 35.47%
Market Cap RM  414.00 m
Shares (m)  120.00
Per Share price RM  3.45
P/E  12.7


Padini

ROE 28.23%
EPS CAGR 5 Yrs 25%
DY High 4.9% - Low 2.9%
D/E 0.15
Revenues Growing last 3 Years
Earnings Growing last 3 Years
LFY Revenues  723.41 m
LFY Earnings  96.00 m
Gross Margin 48.19%
Market Cap RM 1236.87 m
Shares (m) 657.91
Per Share price RM 1.88
P/E 12.9


Zhulian

ROE 25.91%
EPS CAGR 5 Yrs 14.7%
DY High 8.7% - Low 5.4%
D/E 0.00
Revenues Growing last 3 Years
Earnings Growing last 3 Years
LFY Revenues  450.43 m
LFY Earnings 117.09  m
Gross Margin 72.51%
Market Cap RM 1334.00 m
Shares (m) 460.00
Per Share price RM  2.90
P/E 11.4


DCA = durable competitive advantage

Hot Stock - Nestle

Nestle's 3 year profit before tax compound annual growth rate to grow by 16.1% in financial year 2013.

Domestic consumption, which makes up an estimated 75% of sales, is expected to remain buoyant driving this growth.

There would be higher capital expenditure to help boost beverage and confectionery segments in 2013.

Sales are estimated to grow by 6% and 15% respectively for both these segments.

Cautious outlook on escalating raw material prices especially for cocoa butter and milk solids.

http://www.theedgemalaysia.com/business-news/234684-hot-stock-nestle-rises-22-sen-despite-ta-report.html

Beaten-Down Stocks in Europe May Provide a Great Source of Income

by Jason Jenkins, Investment U Research

Friday, September 14, 2012

Time to Look for Opportunities

You should always be looking for opportunities where others are avoiding. It should be the contrarian in you. Every security in Europe isn’t bad just because Europe’s political theater is dysfunctional. Just like many money managers out there, you want to try to maintain a diversified global portfolio. And that being the case, there are a lot of beaten-down European stocks out there.

But, as always, you have to be smart. Some stocks have been knocked around because they deserve to be. But you can get a little hedge against volatility through looking for shares of cheap European companies that are going to give you a regular dividend. They are out there.

First Focus on Dividend-Paying Multi-Nationals

Last week, MarketWatch quoted Weyman Gong, a principal at Signature, a wealth management firm in Norfolk, Virginia: “This dividend-paying stock segment is the most stable in the market.” Gong has stated that he’s staying put with what’s in his portfolio now.

These are companies in Europe with a broad international influence. Some of his portfolio members listed in the United States are:

• British American Tobacco PLC (NYSE: BTI)
• Philip Morris International Inc. (NYSE: PM)
• Nestle SA (OTC: NSRGY.PK)
• Unilever PLC (NYSE: UL)

But Also Consider the Risks…

Julian Pendock, Chief Investment Officer at London-based Senhouse Capital, states, “Dividends in Europe are more attractive than elsewhere, but should be given higher levels of risk and uncertainty going forward because markets are all driven by politicians and central bankers. There are some excellent higher-yield companies around, but one has to be discerning about risk.”

Will James, a European-stock fund manager at Standard Life Investment based in Edinburgh, believes that the doom and gloom predictions are a bit over the top. He went on to say that, “It’s not as bad as the headlines suggest. You have companies across Europe that have very strong balance sheets and don’t have to go to the debt markets.”

James noted that many companies have posted meaningful dividend hikes and plan to continue dividend growth payout. They include such companies as:

• Oesterreichische Post AG (OTC: OERCF.PK), which handles the mail in Austria. Currently, it’s yielding 7%. James expects the dividend to grow about 5% every year.

• Eni SpA (NYSE: E) is an Italian multinational oil and gas company that Matt Carr has written about for Investment U before. It has already made the announcement that it will increase its dividend to keep in line with inflation. The last boost was about a 3.5% increase and it’s currently sporting a 6% dividend.

James also stated that it isn’t so bad to go after companies with lower yields if you follow an investing strategy kind of like Warren Buffett’s “moat” strategy.

He believes it’s worth the trade-off if it’s a strong franchise, the industry is difficult to enter, and the company possesses a virtual monopoly or control of a limited market. All this gives the company a steady cash flow.

The example he provided was Novo Nordisk A/S (NYSE:NVO). It’s a Denmark-based health care company that produces diabetes care equipment and medications. It also focuses on other areas, such as hemostasis management, growth hormone therapy and hormone replacement therapy.

The company has increased its dividend 40% in a year. And Novo Nordisk AS has been consistent with its dividend increases. The dividend has been increased yearly since its IPO 11 years ago.

James concluded by saying, “If I can get a 4% dividend yield from that company and it will be here in four years’ time, I’m going to get a fairly attractive total return.”

If you do your due diligence, I think you can find income bargains almost anywhere throughout Europe. Stay tuned as our experts share their most profitable findings…

http://www.investmentu.com/2012/September/beaten-euro-stocks-income.html

Industries - Dairy Products

Nestle Quarterly Report History

NESTLE Quarter Report History

Announcement Date	Financial Year	Quarter Number	Financial Quarter	Revenue (RM,000)	Profit Before Tax (RM,000)	Net Profit (RM,000)	Earning Per Share (Cent)	Dividend (Cent)	NTA (RM)
30/08/2012	31/12/2012	2	30/06/2012	1,149,522	144,008	120,495	51.38	55.00	2.810
25/04/2012	31/12/2012	1	31/03/2012	1,164,128	206,827	158,080	67.41	0.00	3.570
23/02/2012	31/12/2011	4	31/12/2011	1,188,961	101,847	87,066	37.13	125.00	2.730
04/11/2011	31/12/2011	3	30/09/2011	1,171,468	138,080	110,000	46.91	0.00	2.930
18/08/2011	31/12/2011	2	30/06/2011	1,155,567	127,775	106,549	45.44	55.00	2.580
20/04/2011	31/12/2011	1	31/03/2011	1,184,998	191,107	152,686	65.11	0.00	3.280

NESTLE (MALAYSIA) BERHAD 30/08/2012

NESTLE (MALAYSIA) BERHAD

30/08/2012
Financial Year End 31/12/2012
Quarter 2
Quarterly report for the financial period ended 30/06/2012
The figures have not been audited

SUMMARY OF KEY FINANCIAL INFORMATION 30/06/2012

		INDIVIDUAL PERIOD		CUMULATIVE PERIOD
		CURRENT YEAR QUARTER	PRECEDING YEAR CORRESPONDING QUARTER	CURRENT YEAR TO DATE	PRECEDING YEAR CORRESPONDING PERIOD
		30/06/2012	30/06/2011	30/06/2012	30/06/2011
		$$'000	$$'000	$$'000	$$'000
1	Revenue	1,149,522	1,040,114	2,313,650	2,112,874
2	Profit/(loss) before tax	144,008	127,774	350,835	318,881
3	Profit/(loss) for the period	120,495	98,386	278,575	245,538
4	Profit/(loss) attributable to ordinary equity holders of the parent	120,495	98,386	278,575	245,538
5	Basic earnings/(loss) per share (Subunit)	51.38	41.96	118.80	104.71
6	Proposed/Declared dividend per share (Subunit)	55.00	55.00	55.00	55.00
		AS AT END OF CURRENT QUARTER		AS AT PRECEDING FINANCIAL YEAR END
7	Net assets per share attributable to ordinary equity holders of the parent ($$)	2.8100		2.7800

Nestle - Return on Retained Earnings

Nestle

(Figures are in sens)

Year		DPS		EPS		Retained EPS
2002		98.5		63.2		-35.3
2003		70.2		81.5		11.3
2004		75.2		94		18.8
2005		80.2		114		33.8
2006		95		113		18
2007		100		124.5		24.5
2008		190		145.4		-44.6
2009		130		150		20
2010		150		166.9		16.9
2011		170		194.6		24.6
Total		1159.1		1247.1		88
2002-2011
DPO				0.93
EPS increase				131.40
Return on retained earnings				149%