Mamee- a very attractive consumer stock

Background

Mamee-Double Decker (M) Bhd ('Mamee') is principally involved in the manufacture and marketing of fast moving consumer products, such as food, dairy products and soft drinks.

Recent Financial Results

Its recently announced results for 2Q2009 ended 30/6/2009 shows that Mamee can maintain its top-line & bottom-line in the difficult economic environment. Its net profit increased by 1.4% q-o-q or 185% y-o-y to RM10.7 million while turnover increased by 12.5% q-o-q or 4.3% y-o-y to RM103 million.


Table 1: Mamee's 8 quarterly results

Over 21 quarters, Mamee's turnover grew from RM69 million in QE30/6/2004 to RM103 million in the recently completed QE30/6/2009- a compounded annual growth rate of 9%. At the same time, its net profit grew from RM2.6 million to RM10.7 million- a compounded annual growth rate of 33%.


Chart 1: Mamee's 21 quarterly results

Valuation

Mamee (closed at RM2.50 yesterday) is now trading at a trailing PE of 5.4 times (based on last 4 quarters' EPS of 46 sen) or at Price to Book of only 1 time. At these multiples, Mamee is deemed very attractive. With its high growth rate, I believe Mamee could easily trade at a PE of 10 times; thus giving the stock a target of at least RM4.60.

Technical Outlook

Mamee is in a short-term uptrend, with support at RM2.30. Its immediate resistance is at RM2.60 and thereafter at RM2.75. See the daily & weekly charts below.


Chart 2: Mamee's daily chart as at Aug 20, 2009 (Source: Quickcharts)


Chart 3: Mamee's weekly chart as at Aug 20, 2009 (Source: Quickcharts)

Conclusion

Based on good financial performance; attractive valuation; and positive technical outlook, Mamee is a good stock for medium- & long-term investing.