Fundamental Analysis for DUTCH LADY MILK INDUSTRIES BHD

Transcription

1 Fundamental Analysis for DUTCH LADY MILK INDUSTRIES BHD Date of Analysis: Company Name: 6-Jun-11 DUTCH LADY MILK INDUSTRIES BHD Board: Main Stock Code (Bursa): DLADY FBMKLCI: N Stock Code (Bloomberg): SIME:MK Sector: CONSUMER PRODUCTS Stock Code (Reuters): DLM:MK Industrial PE: 2.7 Price as of Analysis: Rolling EPS: 1.12 Stock Grade Dividend Cash Cows Financial Statements: Year over year, Dutch Lady Milk Industries Bhd has seen revenues remain relatively flat (691.8M to 71.6M), though the company was able to grow net income from 6.4M to 63.9M. A reduction in the percentage of sales devoted to cost of goods sold from 66.85% to 63.4% was a key component in the bottom line growth in the face of flat revenues. 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Income Statement -> Sales Revenue & Net Income After Tax increasing in the past 4 years Cash Flows -> Net Cash from Operations increasing in the past 4 years Growing/consistent revenue in EPS, revenue and net profit in the last 4 quarters The current quarter's EPS is up more than 15% from the same quarter the year before. 2 - Sustainable Competitive Advantage 2.1. Strong brand, monopoly or barriers to entry 2.2. Gross Profit Margin (> 4%) & Net Profit Margin (> 1%) high & consistent 2.3. Consistently high ROE > 15% 3 - Strong Future Growth Drivers 3.1. Able to deliver double-digit growth in next 3-5 years 3.2. LT Growth Rate is positive 4 - Conservative Debt 4.1. Long term debt < 4 times Net Profit 4.2. Debt/Equity Ratio < Current Ratio > Positive Accounting KPI & Ratios 5.1. DUE-D Basic > 7%

2 5.2. FQA Score > 6% 5.3. SWC Score > 7% p.a ROIC > 15% 6 - Healthy Cash Flow 6.1. Working capital increase slower than sales 6.2. Short & declining "Cash Conversion Cycle" 6.3. Free Cash Flow / Sales > 5% 7 - Management is Holding/Buying Stock 7.1. Is key management holding/buying large proportion of stock. 8 - Risks are Managed 8.1. Understand the risks of the company and how it is managed. 9 - Price is below Intrinsic Value 9.1. Price is below Intrinsic Value (Bonus: Price can double within 3 years) 1 - Stock Price Breaks out of Consolidation/Dip on an Uptrend 1.1. Stock price breaks out of consolidation/dip on an uptrend and above 2 and 5 moving averages on monthly chart.

3 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Income Statement -> Sales Revenue & Net Income After Tax increasing in the past 4 years. RM (') TOTAL REVENUES 513,65 69, , ,847 71,588 NET INCOME 43,65 47,255 42,647 6,4 63,887 8, 7, 6, 5, 4, 3, 2, 1, TOTAL REVENUES NET INCOME 1.2. Cash Flows -> Net Cash from Operations increasing in the past 4 years. RM (') NET CASH FROM 54,122 45,114 29,897 89,377 98,389 OPERATIONS 12, 1, 8, 6, NET CASH FROM OPERATIONS 4, 2,

4 1.3. Growing/consistent revenue in EPS, revenue and net profit in the last 4 quarters Turnover Trend Net Profit Trend 5 3/1/21 6/1/21 9/1/21 12/1/21 3/1/ EPS Trend Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Quarter 1.4. The current quarter's EPS is up more than 15% from the same quarter the year before. EPS Growth: 36%

5 2 - Sustainable Competitive Advantage 2.1. Strong brand, monopoly or barriers to entry 1. Does it have a monopoly situation? NO 2. Does it have a strong leading brand? Strong 3. Does it have a high barriers to entry? High 4. Does it have market leadership? Strong 2.2. Gross Profit Margin (> 4%) & Net Profit Margin (> 1%) high & consistent Gross Profit: Profit After Tax: 262,6 Sales Revenue: 71,588 63,887 Minority Interest: Gross Profit Margin: 37% Net Profit Margin: 9% 2.3. Consistently high ROE > 15% ROE

6 3 - Strong Future Growth Drivers 3.1. Able to deliver double-digit growth in next 3-5 years Summary of analyst reports on company and industry projections: Summary of CEO message on future prospects: 3.2. LT Growth Rate is positive LT Growth Rate: 2.61

7 4 - Conservative Debt 4.1. Long term debt < 4 times Net Profit Long Term Debt: Long Term Debt < 4 times Current Net Earnings (After Tax): Debt/Equity Ratio < 1 Debt/Equity Ratio: Current Ratio > 1 Current Ratio (MRQ): 2.2

8 5 - Positive Accounting KPI & Ratios 5.1. DUE-D Basic > 7% DUE-D Basic: 1% 5.2. FQA Score > 6% FQA Score: 1% 5.3. SWC Score > 7% p.a. SWC Score: 8.87% 5.4. ROIC > 15% EBIT (1-Tax 65,26 58,154 82,31 89,221 rate%) Total Equity 127,3 161,6 18, 197,5 Short Term Debt 16,4 Long Term Debt Cash & Equiv 17,267 23,792 41,732 85,657 ROIC 51.43% 42.2% 59.33% 79.77% 9.% 8.% 7.% 6.% 5.% 4.% ROIC 3.% 2.% 1.%.%

9 6 - Healthy Cash Flow 6.1. Working capital increase slower than sales Sales Revenue 69, , ,847 71,588 Sales Growth YOY 17% -3% 3% Inventory 117,9 74,9 57,6 72,7 Accounts Receivable 99, ,282 94,5 75,865 Accounts Payable 143, ,731 92,188 99,986 Working Capital 73,343 77,451 59,912 48,579 Working Capital Growth YOY 5.6% % % Inventory Days Days Receivable Days Payable Cash Conversion Cycle % 15% 1% 5% % -5% -1% -15% -2% -25% Sales Growth YOY Working Capital Growth YOY 6.2. Short & declining "Cash Conversion Cycle" Cash Conversion Cycle 6.3. Free Cash Flow / Sales > 5% Free Cash Flow/Sales: 12.71%

10 7 - Management is Holding/Buying Stock 7.1. Is key management holding/buying large proportion of stock. Shareholding Analysis: FRINT BEHEER IV BV & SKIM AMANAH SAHAM BUMIPUTERA are the major shareholders

11 8 - Risks are Managed 8.1. Understand the risks of the company and how it is managed. Risk Management:

12 9 - Price is below Intrinsic Value 9.1. Price is below Intrinsic Value (Bonus: Price can double within 3 years) Valuation Method Discounted Cash Flow Growth Rate 5Y Y / /2 Dividend Discounted Remark PE Sector Avg. PE PE Model PEG Estimated IV: From 19 To 23 Discount from IV: From 4.1% To 2.8% Discount from IV is not more than 2% Based on PEG, it is currently undervalued.

13 1 - Stock Price Breaks out of Consolidation/Dip on an Uptrend 1.1. Stock price breaks out of consolidation/dip on an uptrend and above 2 and 5 moving averages