KLCI Stock - F&N / 3689 - 2011 Quarter 1

Company Info

Market Capital (Capital Size)	5,459,570,781 (Very Large)
Par Value	RM 1.00

My Analysis

Forecast P/E now	(15.22-0.545)/0.8 = 18.34 (High)
Target Price	12.80+0.545 = 13.34 (PE 16.0, EPS 0.8, DPS 0.545)
Decision	NOT BUY unless revenue and profit increase more
Comment	Revenue Increased, higher than preceding year corresponding period also but still lower than FY10Q2, eps Increased (after deduct non-repeatable gain), higher than preceding year corresponding quarter also but still lower than FY10Q2, Free cash flow and net cash flow both also increasing, better liquidity ratio, better gearing ratio, better working capital, prices of key raw materials increasing, involved into snack business
First Support Price	15.0
Second Support Price	14.42
Risk Rating	MODERATE

Research House

AMMB Target Price	17.2 (2011-01-13)
CIMB Target Price	11.7 (2011-02-08)
Inter Pacific Target Price	14.9 (2011-02-08)
Maybank Target Price	15 (2011-02-08)
TA Target Price	16 (2011-02-08)

Accounting Ratio

Return on Equity	43.47%
Dividend Yield	3.58%
Profit Margin	13.23%
Tax Rate	21.29%
Asset Turnover	1.2692
Net Asset Value Per Share	4.24
Net Tangible Asset per share	3.9
Price/Net Tangible Asset Per Share	3.84
Cash Per Share	2.35
Liquidity Current Ratio	1.5063
Liquidity Quick Ratio	1.1009
Liquidity Cash Ratio	0.6275
Gearing Debt to Equity Ratio	1.0193
Gearing Debt to Asset Ratio	0.5047
Working capital per thousand Ringgit sale	17.5%
Days to sell the inventory	57
Days to collect the receivables	59
Days to pay the payables	78

My notes based on 2011 quarter 1 report (number in '000):-
- Group revenue for the quarter crossed the billion Ringgit mark, representing an increase of 17% over the same period last year

- Soft drinks revenue growth accelerated by 25% on account of continued strong demand across all product categories, an earlier Chinese New Year sales window and incremental sales from new product variants. The Group had recently introduced several new fruity teas under SEASONS and juice drinks under Fruit Tree in PET bottle. Redbull energy drinks distribution, which had not started during the corresponding quarter last year, further added to the growth

- Dairies revenue grew 12% contributed mainly from broad-based volume growth in Thailand and Indochina. In Malaysia, condensed milk volume stagnated at the dairies plant with volume switching from export to meet domestic demand given the capacity constraint. Revenue improved on account of withdrawal of trade discount preceding an anticipated price increase driven by higher input cost

- Group operating profit was RM132 million or 35% above the same period last year. Soft drinks operating margin benefited from greater economies of scale on higher volume despite higher input costs. While the operating margin for dairies Thailand was maintained due to higher supply chain and manufacturing efficiency from the Rojana factory, operating margin for Malaysia came under pressure due to escalating raw materials costs, of which the reduction of sugar subsidy in Malaysia was a major factor

- Group profit after taxation for the quarter improved 46% to RM107 million on account of higher revenue and tax incentives enjoyed by the Dairies plant in Rojana, Thailand

- Group PBT of the continuing operations for the quarter of RM136 million was 41% higher than the preceding quarter on strong soft drinks and dairies operating performance, which more than made up for the absence of one-off gain from Property division recorded in the preceding quarter

- Estimate next 4Q eps after 2011 Q1 result announced = 0.2*4 = 0.8(around 5% ROE), estimate PE on current price 15.22 = 18.34(DPS 0.545)
- Estimate next 4Q eps after 2010 Q4 result announced = 0.875*0.95 = 0.8313, estimate highest/lowest PE = 17.58/15.82 (DPS 1.645)
- Estimate next 4Q eps after 2010 Q3 result announced = 0.8236(correction), estimate highest/lowest PE = 17.53/15.85 (DPS 0.465)
- Estimate next 4Q eps after 2010 Q2 result announced = 1.0072(10% grow from 0.4578*2), estimate highest/lowest PE = 14.43/10.18 (DPS 0.465)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.961(10% grow from 0.2184*4), estimate highest/lowest PE = 11.06/10.44 (DPS 0.47)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.8195, estimate highest/lowest PE = 13.58/12.04 (DPS 0.47)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.8, estimate highest/lowest PE = 12.79/11.29 (DPS 0.47)

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