NST Business
KUALA LUMPUR: Investors should have Nestle (Malaysia) Bhd in their portfolio on the back of its defensive nature and as a proxy to Malaysia’s recovery in consumption growth, Hong Leong Investment Bank Bhd (HLIB) said.
HLIB expects Nestle Malaysia, the local unit of Swiss food and beverage giant, to continue riding on the improving consumer sentiment domestically.
“The governments RM5,000 cash handouts to 95,000 Felda settlers and BR1M payments in August are expected to stimulate consumer spending.
“However, rising cost of key commodities may raise input costs going forward as a portion of the group’s hedges rolls over,’ the firm said when reviewing Nestle’s second quarter results.
Nestle Malaysia reported a six-month net profit of RM392.5 million which accounted for 55 per cent and 59 per cent of HLIB and consensus full-year forecasts respectively.
HLIB deemed the results as within expectations, given that the first half of the year historically accounts for between 55-60 per cent of Nestle Malaysia’s full-year earnings.
Its second quarter revenue grew 3.8 per cent year-on-year to RM1.28 billion due to higher domestic sales volume and exports. However, net profit eased 14.2 per cent to RM162.1 million due to higher cost of key commodities (coffee beans, milk powder and palm oil). Year-to-date revenue was 4.1 per cent higher at RM2.66 billion.
HLIB said despite the steep increase in cost of goods sold (witnessed by a decline in gross profit margin, which slid from 41.4 per cent to 38.3 per cent), internal efficiency measures saw operating profit grow 0.7 per cent to RM519.2 million.