AJINOMOTO (MALAYSIA) BERHAD

Business Summary

Ajinomoto (Malaysia) Berhad is a manufacturing company listed on the Malaysian Stock Exchange. It is well known for manufacturing high-quality Monosodium Glutamate (MSG), a kind of seasoning widely used in Asian cooking. 

Ajinomoto (Malaysia) Berhad is one of the small companies under Ajinomoto Co., Inc. Ajinomoto Co., Inc. is a Japanese food and biotechnology company based in Japan. Their manufacturing plant in Malaysia started commencement in the year 1965. Well known for producing Monosodium Glutamate, Ajinomoto (Malaysia) Berhad also manufacturers other products such as seasonings, flavours and sweeteners.

Ajinomoto product brand portfolio

Apart from the retail brands, Ajinomoto (Malaysia) Berhad also manufactures speciality industrial products for food manufacturers as well. Brands under the industrial products include AJI-AROMA, AJIMATE, ACTIVA TG and others.

Last update: 10.10.2019

Dividends (4/5): ⭐ ⭐ ⭐ ⭐

Value (4/5): ⭐ ⭐ ⭐ ⭐

Financials (4/5): ⭐ ⭐ ⭐ ⭐

Growth (4/5): ⭐ ⭐ ⭐ ⭐

Business (4/5): ⭐ ⭐ ⭐ ⭐

Reference: (i) MyKayaPlus Metrics Definition (ii) MyKayaPlus Metric Evaluation Scale

Financial Performance

As of the financial year of 2010, Ajinomoto (MALAYSIA) Berhad has registered a consistent 10- year CAGR growth of 4.63% in terms of revenue. Gross profit, however, grew at a CAGR 8.53% for the past 10 years. Return on equity is stable at 12.16% while return on assets is at 10.61%. 

In the year 2017, there was a sharp spike in the ROE and ROA, due to a one-off gain recognition that Ajinomoto (Malaysia) Berhad registered for the sale of a land parcel with a price around RM150 million. That one-off gain cause a sudden spike in the ROI and ROA. Ajinomoto Bhd eventually paid out a special dividend of RM 1.13 per share.

Ajinomoto (Malaysia) Berhad’s results are still very skewed towards its Malaysia operations, with 61.5% of it contributed by Malaysia sales. Other Asian countries contributed around 23.5% while Middle East markets are at 13.7%. Ajinomoto (Malaysia) Berhad’s manufacturing facilities in Malaysia, which is recognized worldwide as a Halal hub for food manufacturing gives it the edge to further grow its market presence in Muslim majority countries.

Balance Sheet

YearAssets (RM’000)Liabilities (RM’000)Equities (RM’000)Current Ratio
2019533,26167,926465,3358.12
2018456,59249,463437,1299.90
2017532,43857,800474,6389.74
2016367,05359,240307,8135.55
2015332,94653,423279,5225.40

In the year 2019, Ajinomoto (Malaysia) Berhad has Assets of RM 533 million, liabilities of RM 68 million and equity of RM 465 million. Their historical current ratio is always higher than 5, which indicates they would not face any short term payable cash flow problems. One important note when looking into Ajinomoto (Malaysia) Berhad’s balance sheet is that it does not have any borrowings. It is so efficient in running its business that it does not require any financing help from the banks to run its day to day business!

Free Cash Flow & Dividends Paid Out

Source: AJINOMOTO (MALAYSIA) BHD ANNUAL REPORT

Ajinomoto (Malaysia) Bhd’s free cash flow has been trending positively, which mirrors its revenue and profit growth trend. 

Dividend payment wise, we can also observe a year-on-year increase in dividend payout. During the year 2018, Ajinomoto (Malaysia) Bhd distributed out a special dividend of RM1.13 per share, which are proceeds from a land parcel sale to the government.

Since Ajinomoto (Malaysia) does not have any borrowings, plus that their operating cash flow is showing a year-on-year increase, there would be no worry that it may encounter any liquidity issue.

Based on the latest 2019 Annual Report, Ajinomoto (Malaysia) Bhd has a cash stash of Rm 106 million, which is roughly 20% of its total assets! 

Price

MyKayaPlus Verdict

We think that the food and beverage industry is very unlikely to face any major disruption, apart from the presence and emergence of a new competitor selling the same product. That being said, Ajinomoto (Malaysia) Bhd has a wide array of products targeting not only the end consumer but also to big food manufacturers, by being their ingredients supplier.

Ajinomoto (Malaysia) Bhd has recently announced that they will be investing RM 355 million to build a new plant in Bandar Enstek, Negeri Sembilan. Situated in a Halal hub, the new plant, scheduled to start construction in October 2019 will be expected to be completed in March 2022. The new plant definitely signals that the company is aiming for growth and expansion.

Would you consider Ajinomoto (Malaysia) Bhd as an investment opportunity? Let us know in the comments below!

DISCLAIMER
The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
No warranty is made with respect to the accuracy, adequacy, reliability, suitability, applicability, or completeness of the information contained. The author disclaims any reward or responsibility for any gains or losses arising from direct and indirect use & application of any contents of the article/report/written material

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