ROCK solid Nestle (M) Bhd, the most highly-priced stock on Bursa Malaysia today, surely fulfils every criteria of a defensive bellwether counter.
The dairy product manufacturer seems to be hardly traumatised by the unabated global health crisis judging by its 52-week trading range of RM131.10-RM144.50 (a mere 10.2% band).
In fact, its 2Q FY2021 results have been within expectations, thus enabling Nestle Malaysia to rake in a core net profit of RM314.9 mil (adjusted for a RM2.4 mil inventory write-off) for its 1H FY2021 which accounted for 51% of UOB Kay Hian Research and consensus’ full-year forecasts respectively.
“(The company’s) 1H earnings typically account for up to 60% of full-year earnings; however, we expect a reopening of the economy to boost 2H FY2021’s earnings,” commented analyst Philip Wong in a results review.
UOB Kay Hian Research has maintained its “hold” rating on Nestle Malaysia with an unchanged target price of RM129.00.
Above all else, Nestle Malaysia has consistently ensured that its loyal shareholders are duly rewarded by doling out an interim dividend of 70 sen/share (1H FY2020: 70 sen).
Meanwhile, CGS-CIMB Research lowered Nestle Malaysia’s FY2021-2023F earnings per share (EPS) to account for higher commodity prices and lower HORECA sales.
“Hence, our DCF (discounted cash flow)-based target price is lowered to RM135.40 (previously RM136.70),” justified analyst Walter Aw.
“We also maintain our “hold” call as we believe that Nestle’s current valuations will be supported by (i) the defensive nature of its business (consumer staples); (ii) its strong global brand name; and (iii) strong product innovations including the plant-based meal solution segment.”
Below are outlook for Nestle Malaysia from other research houses:
- Kenanga Research: Maintain “neutral” at higher target price of RM143.60 (previously RM142.90)
- MIDF Research: Maintain “neutral” at unchanged RM141.50
- Maybank IB Research: Maintain “sell” at unchanged RM103.35
- Hong Leong Investment Bank Research: Maintain “sell” at RM107.25 (previously RM97.23)
- AmBank Research: Maintain “underweight” with unchanged fair value of RM115
- TA Securities Research: Maintain “sell” at RM140 (previously RM143)
At 4.06pm, Nestle Malaysia was the top gainer on Bursa Malaysia with a share price of RM134.70, up 80 sen or 0.6% with 29,400 shares traded, thus valuing the company at RM31.69 bil. – Aug 25, 2021
