Period 2Q12/1H12
Actual vs. Expectations The 1H12
net profit (NP) of RM278.6m was in line with expectations, making up 56.5% and 57.8%
of the street’s FY12E NP of RM492.7m and our RM482.1m respectively.
Dividends A
RM0.55 interim dividend per share (DPS) was declared in 2Q12 as expected.
(Ex-date: 18/9/2012). Another RM1.35 DPS is expected to be declared in 4Q12,
bringing to a total DPS of RM1.90. This will translate into dividend yield of only
3.0%.
Key Result Highlights QoQ,
NP dropped 23.8% to RM120.5m despite a marginal dip of 1.3% in revenue. Profit
margins were lower QoQ due to higher marketing and promotional activities. Note
that these activities are typically more concentrated in 2Q.
YoY, the
2Q12 revenue increased 10.5% despite the flat export sales. This was mainly due
to the robust double-digit domestic sales growth in confectionery, Nestle
liquid drinks, chilled dairy and ice-cream products, which were mainly driven
by its effective consumer marketing. Despite the higher marketing expenses
spent in conjunction with Nestle Malaysia’s 100-year celebration, 2Q12 PBT
still rose 12.7% YoY as stronger sales in the quarter more than offset the higher
marketing expenses. Moreover, NP jumped even higher with a stronger YoY growth of
22.5% owing to a lower tax bracket.
Due to the
above-mentioned factors, 1H12 revenue and NP also improved by 9.5% and 13.5%
YoY, respectively.
Outlook We continue to see potential sales
growth opportunities for the company driven by the company’s product innovation
and marketing investment as well as its role on the global stage as the Halal
Centre of Excellence for Nestle Global.
Change to Forecasts Maintaining
our FY12-13E NP of RM482m-RM508m.
Rating Maintain MARKET PERFORM
Valuation Revised
our TP on Nestle upwards to RM67.50 (from RM58.00 as per our DCF Model
previously) based on a PER valuation of 31.2x over FY13 EPS of 216.2sen (see
overleaf for details).
Risks 2H12
will be more challenging as there are a number of uncertainties which are
affecting the global economic growth and driving volatilities in the commodity
prices.
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