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Friday, June 10, 2011

KLCI Stock - NESTLE / 4707 - 2011 Quarter 1

Company Info
Market Capital (Capital Size)11,232,550,000 (Very Large)
Par ValueRM 1.00

My Analysis
Forecast P/E now(47.9-1.65)/2.074 = 22.30 (High)
Target Price41.48+1.65 = 43.13 (PE 20.0, EPS 2.074, DPS 1.65)
DecisionNot interested unless revenue and profit increase more
Revenue increased 22.9% and also higher than preceding year corresponding quarter 16.1%, eps increased 288.9% and also higher than preceding year correspnding quarter 10%, cash generated from operating just right enough to cover all expenses, strong liquidity ratio but still at low level now, lower gearing ratio at high level now, all accounting periods are good, raw material costs increasing but offset by increased products price
First Support Price47.5
Second Support Price45.0

Research House
CIMB Target Price38.7 (2011-03-02)
Kenanga Target Price54 (2011-04-21)
MIDF Target Price40.68 (2011-04-21)
TA Target Price45.5 (2011-04-21)
Maybank Target Price45 (2011-04-26)
OSK Target Price47.43 (2011-04-26)

Accounting Ratio
Return on Equity60.02%
Dividend Yield3.44%
Profit Margin16.13%
Tax Rate20.10%
Asset Turnover2.355
Net Asset Value Per Share3.28
Net Tangible Asset per share3.02
Price/Net Tangible Asset Per Share15.89
Cash Per Share0.14
Liquidity Current Ratio1.1082
Liquidity Quick Ratio0.6275
Liquidity Cash Ratio0.0455
Gearing Debt to Equity Ratio1.3157
Gearing Debt to Asset Ratio0.5682
Working capital per thousand Ringgit sale1.9%
Days to sell the inventory35
Days to collect the receivables37
Days to pay the payables69

My notes based on 2011 quarter 1 report (number in '000):-
- After the strong rebound of the Malaysian economy in 2010, the improvement in consumer confidence led to a robust double digits growth in domestic sales. This growth was accentuated by the stocks level reduction in the trade in quarter 1 2010. Towards the end of the quarter, the Group also introduced new products, such as NESTEA in the retail channel and MILO Sejuk

- Exports sales also grew by double digit, sustaining the strong performance achieved last year. The expanding economies of the neighbouring Asian countries played an important role in this encouraging performance

- From an input cost perspective, the prices of all key raw materials consumed by the Group were on an uptrend versus the same period last year. The high volatility in the commodity market continues to be driven by supply tensions, strong demand and speculative investments. Despite higher input cost, favourable product sale mix as well as price increases on selected products contributed to a slight improvement in gross profit margin

- Estimate next 4Q eps after 2011 Q1 result announced = 1.7283*1.2 = 2.074, estimate PE on current price 47.9 = 22.3(DPS 1.65)
- Estimate next 4Q eps after 2010 Q4 result announced = 1.6691*0.8 = 1.3353, estimate highest/lowest PE = 36.21/31.94 (DPS 1.65)
- Estimate next 4Q eps after 2010 Q3 result announced = 0.4827*4 = 1.9308, estimate highest/lowest PE = 23.05/20.99 (DPS 1.5)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.4271*4*1.1 = 1.8792, estimate highest/lowest PE = 23.15/20.22 (DPS 1.5)
- Estimate next 4Q eps after 2010 Q1 result announced = 1.56+0.1491+0.0357 = 1.7448(0.1491 from adjustment between 2009 Q1 eps and 2010 Q1 eps, 0.0357 from QbQ improvement adjustment), estimate highest/lowest PE = 23.21/18.52 (DPS 1.5)
- Estimate next 4Q eps after 2009 Q4 result announced = 1.56(around 4% from 1.5002), estimate highest/lowest PE = 22.12/20.54 (DPS 1.5)
- Estimate next 4Q eps after 2009 Q3 result announced = 1.4537, estimate highest/lowest PE = 23.06/21.12 (DPS 1.3)
- Estimate next 4Q eps after 2009 Q2 result announced = 1.4537, estimate highest/lowest PE = 23.65/21.78 (DPS 1.3)
- Estimate next 4Q eps after 2009 Q1 result announced = 1.5264, estimate highest/lowest PE = 21.42/17.82 (DPS 1.3)

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