Thursday, August 13, 2015

Nestle: Top-line & bottom-line declined

Results Update

For QE30/6/2015, Nestle's net profit dropped 34% q-o-q but rose 5% y-o-y to RM124 million while revenue dropped by 11% q-o-q & 10% y-o-y at RM1.143 billion. Revenue dropped due to slower sales as a result of weaker consumer spending- especially after the implementation of GST in April. The lower net profit in comparison to the prior quarter was the result of a combination of lower turnover and higher investments in marketing. These investments in marketing improved the market share situation and will help the Group to be in a better position in the second half of 2015.

Table: Nestle's last 8 quarterly results

Chart 1: Nestle's revenue, profits, profit margins & dividend for last 33 quarterly results


Nestle (closed at RM71.92 yesterday) is now trading at a PE of 30 times (Based on lats 4 quarters' EPS of 239 sen). At this multiple, Nestle is deemed overvalued. However, Nestle has a decent dividend yield of 3.3%.

Technical Outlook

Nestle is still in an "uptrend" with possible support at RM70.00-72.00.

Chart 2: Nestle's monthly chart as at Aug 12, 2015 (Source:


Based on gsatisfactory financial performance and mildly positive technical outlook, Nestle retains the rating of HOLD. Its upside is limited due to its high valuation.

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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