KLCI Stock - NESTLE / 4707 - 2011 Quarter 3

Company Info

Market Capital (Capital Size)	11,692,170,000 (Very Large)
Par Value	RM 1.00

My Analysis

Forecast P/E now	(49.86-1.75)/1.8764 = 25.64 (High)
Target Price	41.28+1.75 = 43.03 (PE 22.0, EPS 1.8764, DPS 1.75)
Decision	Not interested unless stock price sustain and uptrend start above 49
Comment	Revenue increased 1.4% and also higher than preceding year corresponding quarter 18.2%, eps increased 3.2% but lower than preceding year correspnding quarter 2.8%, cash generated from operating enough to cover all expenses, slightly stronger liquidity ratio at low level now, lower gearing ratio but still at high level now, all accounting ratio are good, higher inventory can indicate better demand of products, f&b segment revenue and profit increasing, affecting by raw material costs increasing
First Support Price	49.0
Second Support Price	47.0
Risk Rating	MODERATE

Research House

CIMB Target Price	38.7 (2011-03-02)
Kenanga Target Price	54 (2011-04-21)
TA Target Price	45.5 (2011-04-21)
OSK Target Price	47.43 (2011-04-26)
Maybank Target Price	45 (2011-08-19)
Affin Target Price	51.95 (2011-11-08)
MIDF Target Price	47.35 (2011-11-08)

Accounting Ratio

Return on Equity	60.15%
Dividend Yield	3.41%
Profit Margin	11.79%
Tax Rate	20.34%
Asset Turnover	2.3628
Net Asset Value Per Share	2.93
Net Tangible Asset per share	2.67
Price/Net Tangible Asset Per Share	18.73
Cash Per Share	0.29
Liquidity Current Ratio	1.2181
Liquidity Quick Ratio	0.6137
Liquidity Cash Ratio	0.0884
Gearing Debt to Equity Ratio	1.7574
Gearing Debt to Asset Ratio	0.6373
Working capital per thousand Ringgit sale	3.7%
Days to sell the inventory	43
Days to collect the receivables	33
Days to pay the payables	68

My notes based on 2011 quarter 3 report (number in '000):-
- The good domestic growth performance was noted for all categories and some with double digit especially for Milks, Coffee and Beverage, Confectionery as well as Nestle Liquid Drinks. The encouraging sales were further driven by higher demand during the fasting month, followed by Hari Raya celebrations

- The increase demand for Coffee Creamers and Soluble Coffees within the Asean region contributed to the strong double digit export growth

- Escalating prices of key raw materials consumed by the Group such as coffee beans, cocoa powder, skimmed milk powder and palm oil have negatively impacted the gross profit margin which reduced by 230bps, despite increasing by 10.3% in absolute terms

- Higher pbt driven by the gross profit evolution and higher investments in marketing activities

- Net profit was slightly lower due to the timing of the Halal Tax incentives utilisation

- Estimate next 4Q eps after 2011 Q3 result announced = 0.4691*4 = 1.8764, estimate PE on current price 49.86 = 25.64(DPS 1.75)
- Estimate next 4Q eps after 2011 Q1 result announced = 1.7283*1.2 = 2.074, estimate highest/lowest PE = 22.44/21.82 (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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