Due to the
challenging market ahead, we continue to hold to our strong conviction stance
on defensive and yield stocks such as Nestle. Generally, big cap consumer
stocks are still trading at their respective +3SD of their 5-year average PER.
As Nestle is currently trading at PERs of 32.9x FY11A, 31.1x FY12E and 29.6x
FY13E respectively, we believe the stock valuation is still undemanding at this
juncture as it is still below the +3SD of the mean at 33.4x. Coupled with the
share price recent correction, we believe a Buy-on-Weakness strategy is hence
appropriate on Nestle at this juncture as it still has relatively good dividend
yields and fundamentals. Thus, we are reiterating our OUTPERFORM call on the
stock with an unchanged TP of RM72.10
based on 33.4x PER of its FY13E EPS.
Breaching RM500m
soon. Over the years, Nestle has consistently improved its NP and bringing
it to new levels without fail. The company so far has registered a good 5-year
CAGR in its NP of 11.5% as of 2011. We expect it to trigger the new NP level of
RM500m next year buoyed by just a conservative revenue growth of 7.7% YoY. Its
share price has also reached the all-time high at RM70.20 this year, arriving
at a new record high PER of 34.1x. Despite the recent correction in Nov12 to
the RM59.00 level due to the weaker market condition, the share price has since
rebounded back to the RM63.00 level. Despite the ebb and flow of the market,
even during when commodities prices were high to its disadvantage, the company
has never disappointed its shareholders. This strong track record coupled with its
continuous comprehensive effort in cost control leads us to continue to believe
in the stock’s further positive growth ahead.
Top pick for the
quarter. Heading into 2013, we expect small to mediumsized companies to
possible face a negative impact from the implementation of the minimum wage
policy (effective Jan 2013). In this respect, we reckon that companies such as
Nestle would have a better scale of operation to minimise the impact. As a
result, we have picked Nestle as our Top pick for the first quarter of
2013.
Decent dividend
yield. On top on that, we expect the
company to pay out RM2.00 in dividend for FY13, which translates into a still
decent NDY of 3.1%. Meanwhile, we are maintaining our FY12 and FY13 net profit forecasts
at RM482.1m and RM507.1m respectively.
Maintain OUTPERFORM.
We have upgraded the stock rating back to an OUTPERFORM on 5 Dec 2012. Since
then, the stock has appreciated 4.9%. Currently, Nestle is trading at PERs of
32.9x FY11A, 31.1x FY12E and 29.6x FY13E respectively. Generally, big cap
consumer stocks are still trading at their respective +3SD of their 5-year
average PER. As Nestle is currently trading at PERs of 32.9x FY11A, 31.1x FY12E
and 29.6x FY13E respectively, we believe the stock valuation is still
undemanding at this juncture as it is still below the +3SD of the mean at
33.4x. Thus, we are reiterating our OUTPERFORM call with an unchanged TP of
RM72.10 based on 33.4x PER over its FY13E EPS.
Source: Kenanga
No comments:
Post a Comment