DLADY – Fundamental Analysis (01 May 2015)

DLADY Analysis:-

Excel – http://1drv.ms/1DnZAX9

Notes – http://tinyurl.com/lby6myo

My View:-

  • Valuation:
    • 10-Y DCF:
      • Good Scenario: 48.64 (Fair value uncertainty: HIGH)
      • Base Scenario: 39.95 (Fair value uncertainty: VERY HIGH)
      • Bad Scenario: 32.8 (Fair value uncertainty: EXTREME)
      • Ugly Scenario: 26.93 (Fair value uncertainty: EXTREME)
      • At current price (47.6), based on RDCF, assumption of FCFF growth rate in the next 10 years is 22.9%.
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 1.716) – Fair value 39.47 (Fair Value Uncertainty: VERY HIGH)
        • R4Q (EPS: 1.716) – Fair value 39.47 (Fair Value Uncertainty: VERY HIGH)
      • Forward:
        • FY15 (EPS: 1.894) – Fair value 43.55 (Fair Value Uncertainty: VERY HIGH)
        • FY16 (EPS: 2.096) – Fair value 48.21 (Fair Value Uncertainty: HIGH)
      • EPS applied to reach the current stock price (47.6): 2.07
  • I am positive with DLADY’s future:
    • Its solid fundamentals and strong branding position
    • Aggressive marketing and promotional activities
    • Robust demand of diary product in the long-term as Malaysia’s population is projected to reach 38 million people by 2040 from 30 million currently.
  • Short term concerns:
    • The sales volume to continue the downtrend in view of the tough and challenging operating environment with consumer spending being undermined by the high costs of living
    • Strong USD/MYR will reduce profit margin of DLADY because of import of raw materials from other countries.
      • PAT of RM34 million in 4Q14 grew by 17% q-o-q and 5% y-o-y, bringing 12M14’s PAT to RM110 million compared to RM138 million in 12M13 (-21% y-oy). The lower PAT was tempered by higher dairy based commodity prices and weakening of the Malaysian Ringgit.
  • However, I think that DLADY should be able to secure a good earnings growth in FY15 with the full effect recognition from the price increases in FY14, further aided by the lower raw material prices barring any big surge in the USD/MYR rate.
  • For the time being, DLADY valuation is less attractive, but you are looking for good dividend payout and defensive counter, DLADY is a very good counter.

Latest Financial – Annual Report 2014 (24 Apr 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4716297

At the time of writing, my family member owned shares of DLADY.

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