For QE31/3/2015, Nestle's net profit increased 91% q-o-q or 2% y-o-y to RM187.9 million while revenue rose by 15% q-o-q or unchanged y-o-y at RM1.278 billion. This positive trend is mainly driven by the strong domestic performance linked to the successful Nestlé’s "Lebih Nilai, Lagi Hebat" campaign that was launched at the end of February 2015. The higher net profit was the result of a combination of higher turnover, favourable input costs, and timing of fixed expenses.
Table: Nestle's last 8 quarterly results
Chart 1: Nestle's revenue, profits & profit margins for last 32 quarterly results
Chart 2: Nestle's dividend & payout ratio for last 32 quarterly results
Valuation
Nestle (closed at RM74.48 yesterday) is now trading at a PE of 31 times (Based on lats 4 quarters' EPS of 237 sen). At this multiple, Nestle is deemed overvalued. Its redeeming point is its attractive dividend yield of 3.2%.
Technical Outlook
Nestle broke above the horizontal resistance at RM69 in January this year. Despite possible near term weakness, the long-term outlook for Nestle looks promising.
Chart 3: Nestle's weekly chart as at Apr 20, 2015 (Source: ShareInvestor.com)
Chart 4: Nestle's monthly chart as at Apr 20, 2015 (Source: ShareInvestor.com)
Conclusion
Based on good financial performance, attractive DY (albeit high PER) & mildly positive technical outlook, Nestle would remain a good stock for long-term investment. Its downside is its high PER which may cap its upside potential.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Nestle.
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