DLADY – Fundamental Analysis (26 Aug 2015)

DLADY Analysis:-

Excel – http://1drv.ms/1MMXuFY

Notes – http://tinyurl.com/lby6myo

My View:-

  • Valuation:
  • Absolute EY%:
  • Trailing:
    • FY14 (EPS: 1.716) – 41.940 (Uncertainty Risk: VERY HIGH)
    • R4Q (EPS: 2.005) – 48.990 (Uncertainty Risk: MEDIUM)
  • Forward:
    • FY15 (EPS: 1.908 ± 5%) – From 44.294 to 48.956 (Uncertainty Risk: MEDIUM to HIGH)
    • FY16 (EPS: 2.089 ± 5%) – From 48.507 to 53.613 (Uncertainty Risk: MEDIUM to HIGH)
  • EPS applied to reach the current stock price (46): 1.882
  • 10-Y DCF:
    • Good Scenario (22.0% – 24.0%): From 52.19 to 57.73 (Uncertainty Risk: MEDIUM)
    • Base Scenario (19.0% – 21.0%): From 44.84 to 49.62 (Uncertainty Risk: MEDIUM to HIGH)
    • Bad Scenario (16.0% – 18.0%): From 38.51 to 42.62 (Uncertainty Risk: VERY HIGH)
    • Ugly Scenario (12.0% – 14.0%): From 31.43 to 34.79 (Uncertainty Risk: EXTREME)
    • At current price (46), based on RDCF, assumption of FCFF growth rate in the next 10 years is 19.5%.
  • Current Dividend Yield: 4.8%
  • In my opinion, DLADY’s fair value range from 48 to 53.
  • 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.
    • 25 Aug 2015 – To date, Dutch Lady had launched a new range of liquid milk products under the name of Dutch Lady PureFarm in an effort to refresh the brand.in addition, Dutch Lady have also strengthened our ready-to-drink products.
  • Concern:
    • 25 Aug 2015 – Milk powder prices succumbed to multiple year-low in early-August due to the concerns of slowing demand from China and oversupply situation. However, the volatility persists as latest figures in mid-August show strong rebound of 7.2%-16.7% in a short period which we believe was driven by the 33% output cut by Fonterra, the world’s biggest milk supplier.
  • DLADY valuation is less attractive, but it is a very defensive stock. I am willing to pay some premium for this. I will continue to hold and accumulate this stock for my kids.
  • Latest Financial – Q2 2015 Financial Report (24 Aug 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4840557

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

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