DLADY – Fundamental Analysis (11 Mar 2016)

Fundamental Analysis as of FY15 – http://www.slideshare.net/lcchong76/dlady-fundamental-analysis-fy15

Excel – http://1drv.ms/224LnOl

Latest Financial – Q4 2015 Financial Report (23 Feb 2016) http://www.bursamalaysia.com/market/listed-companies/company-announcements/5006473

FY15 Q3 Results Highlight:

  • 24 Feb 2016 – YoY, FY15 revenue was flattish at RM1b (+0.1%) due to product re-launching in 1Q15 as well as on the back of weak consumer sentiment throughout the year. Gross profit surged 28.0% to RM420.7m thanks to a sharp decline in milk powder prices by 30.9%-40.0%. However, the Group reinvested the savings from raw material costs into A&P activities, which inflated the distribution expenses by 29.9%. As a result, net profit jumped 28.3% to RM141.0m.
  • 24 Feb 2016 – QoQ, 3Q15 revenue was 8.2% lower at RM255.6m due to high base effect as 2Q15 was aided by-product re-launch. Operating profit managed to inch up by 0.3% to RM65.7m thanks to favourable raw material prices. Net profit climbed 2.4% to RM50.0m, which was a record quarterly profit for the Group, further helped by a marginally lower effective tax rate of 24.0% (2Q15: 25.7%) as well.

Valuation:

In my opinion, fair value of DLADY range from 60 to 68. Uncertainty risk of fair value is from LOW to MEDIUM.

Going Forward:

  • 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.
    • The Group has re-launched Dutch Lady Children Formula Milk since early FY15 and also repackaged its UHT milk to highlight the freshness of its milk as well as mother company, Friesland Campina’s 140 years of farming heritage. The marketing strategy is essential in building the brand equity as well as stimulating the consumer demand with the new image of its 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 still attractive, and it is a very defensive stock.
  • I will continue to hold and accumulate this stock for my kids.

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

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s