NESTLE (MALAYSIA) BERHAD

Business Summary

Nestle (Malaysia) Bhd (Nestle Bhd) is a multinational food manufacturing and marketing company that champions nutritious, health and wellness products. Listed on the Malaysian stock exchange in 1989 at RM5.2 a share, Nestle Bhd has delivered major windfall returns to shareholders today (Share price RM140; Dividends per share RM2.75 per annum)

Nestle Bhd is the biggest Halal producer in Nestle world, with 22% of total production exported to over 50 countries.

It currently has 7 factories, 1 distribution centre in Malaysia and 100% of manufacturing workforces are Malaysians.

Update 09.02.2019

Dividends (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

Value (2/5): ⭐ ⭐ 

Financials (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

Growth (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

Business (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

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


Brands & Portfolio

Chocolate Malted Beverage: MILO

Milk Powders & Cereal: Nespray, Nestle Omega, Nestle Everyday, Nestum

Savoury and Seasoning: Maggi Sauces, food business solutions, bouillons, seasonings

Ice Cream: Nestle Ice Cream, La Cremeria, Mat Kool, Crunch

Coffee: Nescafe, Coffeemate, Nespresso, Dolce Gusto

Confectionary: Kit Kat, Crunch

Infant Formula, Growing Up Milk and Cereal: Nan, Cerelac, Lactagrow,

Nestle Health Science & Nestle Nutrition: Nutren

Divested food business: Chilled Dairy (Yogurt & Yogurt Drinks)

 

Financial Performance

The Making of a Great Company

There is a common saying for lousy companies with an uncompelling business model, where the price will get “cheaper than cheap”, or “there is no lowest, only lower than the previous lowest”. Nestle, on the other hand, is the total opposite of the bearish quotes mentioned.

Not only Nestle Berhad manages to beat its record sales turnover year by year but has also put in extra initiatives to increase its gross profitability. Both of these actions compound the earnings. 

Coupled with another important factor that Nestle Berhad has never undergone any share splits or major increase of its Net Outstanding Shares, Nestle Berhad shareholders generally hold the same % of ownership throughout the years. 

 

Balance Sheet

 

YearAssets (RM’000)Liabilities (RM’000)Equities (RM’000)Current RatioGearing Ratio (%)
20182,847,2822,192,949654,3330.68335.14%
20172,616,8231,980,929635,8940.65311.52%
20162,494,6101,847,389647,2210.65285.43%
20152,488,3301,779,734708,5960.67251.16%
20142,242,2721,526,159777,1370.68196.38%

As at 2018, Nestle Bhd has assets totalling RM2.8 billion, with liabilities increasing to RM2.2 billion. Equities stayed flat at RM654 million. Nestle Bhd’s current ratio has been stable at 0.68, meaning its current liabilities is more than its current assets. Gearing ratio increased to 335%

So the next question we would ask is, is Nestle Bhd generating enough cash to meet its current liabilities?

 

Operating Cash Flow & Dividend Paid Out

Source: NESTLE BHD ANNUAL REPORT

In tandem with its increasing revenues and profits, Nestle Bhd has also a fantastic track record in generating cash from its operating activities, which is the sales and manufacturing of products. 

And not only we are more assured that the cash generated is able to pare down its payables and borrowings, but it is also worth mentioning that a great company like Nestle passes down the balance cash generated as generous dividends.

Interesting fact: I do know of a personal friend of mine who was granted ESOS by Nestle Berhad when The Company was listed in 1989 at a price of RM5.20 a share. He is still holding those shares till this very day. With share price now at RM146, and a dividend per share of RM2 per share, his capital gain + dividend yield itself alone has actually outperformed a lot of professional investors and fund managers.

 

Nestle Berhad’s unique business model, where it produces quality products that are essential to our daily essentials, means that with the growth of the human population, the Company will always be growing. 

Coupled with prudent management and efficient operations, Nestle Berhad will be a “boring investment”. Dividends may increase little by little, but it has proven to be a company able to withstand through the change of times. 

Question is, what is the best time to buy Nestle Berhad? 😉

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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