Dutch Lady Milk - Results in-line, 130sen GDPS again!

Period  4Q12/ FY12

Actual vs. Expectations  The FY12 net profit (NP) of RM123.4m was inline with the expectations, making up 105.7% and 104.6% of our estimate and consensus of RM116.7m and RM118.0m, respectively.

Dividends  DLady proposed a single-tier interim dividend of 50sen and a special interim dividend of 80sen for FY13. For FY13, we estimate a NDPS of 257sen, translating into an attractive net yield of 6.0%. Total of 260 sen dividend was declared for FY12, translating into 6.1% yield.

Key Result Highlights  QoQ, despite flattish revenue, NP improved 5.4% QoQ, boosted by a higher sales volume and favourable sales mix.

 YoY, 4Q12 and FY12 revenue rose by 6.8% and 8.8%, respectively, due mainly to the better sales of its powder and liquid products coupled with new products introduction such as chocolate milk powder and new mid-premium growing-up milk powder (Dutch Lady ActivGold). Meanwhile, the NP also rose 19.1% and 14.1% YoY for both 4Q12 and FY12, respectively. The improvements were attributable to the higher sales above and helped also by a better sales mix.

 Better margins. FY12 PBT margin improved by 1.3 ppt YoY. We believe this is mainly due to cessation of its lower-margin condensed milk production in September 2011, as well as, the better powder milk sales (which should have better margins as compared to liquid milk).

Outlook  We remain positive on the company’s prospect going forward given its strong brand and market position, especially with new innovative launches. Nevertheless, FY13 will be a challenging year due to high level of raw material prices and higher marketing expenses (as MNC tends to spend more on marketing expenses during slow times).

Change to Forecasts  We have revised up our FY13-14E NP estimates by +4.7% and +6.6% to RM126.4-RM136.4m, respectively (from RM120.7-RM127.9m).

Rating   Maintain MARKET PERFORM

Valuation   We have also revised our TP on DLady upwards to RM47.00 (from RM45.50 previously) based on an unchanged PER of 23.9x over the revised FY13 EPS of 197 sen.

Risks   The global economic uncertainty may impact consumers spending, which will in turn hit the company’s earnings.

Source: Kenanga