KLCI Stock - NESTLE / 4707 - 2011 Quarter 1

Company Info

Market Capital (Capital Size)	11,232,550,000 (Very Large)
Par Value	RM 1.00

My Analysis

Forecast P/E now	(47.9-1.65)/2.074 = 22.30 (High)
Target Price	41.48+1.65 = 43.13 (PE 20.0, EPS 2.074, DPS 1.65)
Decision	Not interested unless revenue and profit increase more
Comment	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 Price	47.5
Second Support Price	45.0
Risk Rating	MODERATE

Research House

CIMB Target Price	38.7 (2011-03-02)
Kenanga Target Price	54 (2011-04-21)
MIDF Target Price	40.68 (2011-04-21)
TA Target Price	45.5 (2011-04-21)
Maybank Target Price	45 (2011-04-26)
OSK Target Price	47.43 (2011-04-26)

Accounting Ratio

Return on Equity	60.02%
Dividend Yield	3.44%
Profit Margin	16.13%
Tax Rate	20.10%
Asset Turnover	2.355
Net Asset Value Per Share	3.28
Net Tangible Asset per share	3.02
Price/Net Tangible Asset Per Share	15.89
Cash Per Share	0.14
Liquidity Current Ratio	1.1082
Liquidity Quick Ratio	0.6275
Liquidity Cash Ratio	0.0455
Gearing Debt to Equity Ratio	1.3157
Gearing Debt to Asset Ratio	0.5682
Working capital per thousand Ringgit sale	1.9%
Days to sell the inventory	35
Days to collect the receivables	37
Days to pay the payables	69

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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