KLCI Stock - NESTLE / 4707 - 2011 Quarter 4

Company Info

Market Capital (Capital Size)	13,108,550,000 (Very Large)
Par Value	RM 1.00

My Analysis

Forecast P/E now	(55.9-1.8)/1.749 = 30.93 (High)
Target Price	45.47+1.8 = 47.27 (PE 26.0, EPS 1.749, DPS 1.8)
Decision	Not interested unless coming financial report got significant good result
Comment	Revenue increased 1.5% and was second consecutive quarter increasing and also higher than preceding year corresponding quarter 23.3%, eps decreased 20.8% but higher than preceding year correspnding quarter 121.8%, cash generated from operating enough to cover all expenses, gross margin still very high, slightly weaker liquidity ratio at low level now, higher gearing ratio at very high level now, debt ratio geting near to historical high, all repayment period is good, higher inventory can indicate better demand of products, f&b segment growth but affect by raw material costs increasing
First Support Price	55.8
Second Support Price	55.0
Risk Rating	MODERATE

Research House

TA Target Price	45.5 (2011-04-21)
OSK Target Price	47.43 (2011-04-26)
Affin Target Price	51.95 (2011-11-08)
Maybank Target Price	52.4 (2012-02-24)
MIDF Target Price	54.55 (2012-02-24)
CIMB Target Price	48.3 (2012-02-27)
Kenanga Target Price	58 (2012-03-23)

Accounting Ratio

Return on Equity	71.20%
Dividend Yield	3.22%
Gross Profit Margin	33.62%
Operating Profit Margin	9.10%
Net Profit Margin	8.57%
Tax Rate	14.51%
Asset Turnover	2.3478
Net Asset Value Per Share	2.73
Net Tangible Asset per share	2.47
Price/Net Tangible Asset Per Share	22.59
Cash Per Share	0.22
Liquidity Current Ratio	1.1097
Liquidity Quick Ratio	0.5439
Liquidity Cash Ratio	0.0574
Gearing Debt to Equity Ratio	2.1244
Gearing Debt to Asset Ratio	0.6799
Working capital per thousand Ringgit sale	2.1%
Days to sell the inventory	60
Days to collect the receivables	35
Days to pay the payables	101

Technical Analysis

SMA 20	55.938 (Downtrend 2 days)
SMA 50	55.876 (Uptrend)
SMA 100	55.331 (Uptrend)
SMA 200	50.95 (Uptrend)
MACD (26d/12d)	0.005432 ( 0.00429 )
Signal (9)	0.016266 ( 0.002708 )
MACD Histogram	0.010834 (Bearish trend 25 days)

My notes based on 2011 quarter 4 report (number in '000):-
- The robust double digit growth was driven by solid domestic and export performance. The good domestic growth was noted for all categories with stronger demand for Milks, Coffee and Beverage, Confectionery as well as Nestlé Liquid Drinks

- The strong demand for commodities kept the prices of key raw materials consumed at higher levels. These high input cost put pressure on the Group's gross margin

- The quarter also saw higher investment in marketing activities that continues to produce good results. Higher sales for the quarter resulted in a better absorption of fixed costs, which more than offset the input cost and marketing investments. As a result, the net profit increased to RM87.1 million with an underlying improved margin

- Lower operating margin than FY11Q3 largely driven by strong promotional marketing investments towards the year-end

- Estimate next 4Q eps after 2011 Q4 result announced = 640860*0.64/234500 = 1.749, estimate PE on current price 55.9 = 30.93(DPS 1.8)
- Estimate next 4Q eps after 2011 Q3 result announced = 0.4691*4 = 1.8764, estimate highest/lowest PE = 29.63/24.98 (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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