Nestle still a market leader in FMCG space
KUALA LUMPUR: Nestle (Malaysia) Bhd (Nestle) remains the market leader in Malaysia’s fast-moving consumer goods (FMCG) segment with 15.5 per cent market share.
According to AmInvestment Bank Bhd (AmInvestment Bank) in its initiation coverage on the group expect Nestle to register core net earnings of RM695.5 million, RM744.8 million and RM810.5 million for FY18F, FY19F and FY20F respectively.
“We like Nestle for its established household brand presence, position as the market leader in the FMCG space and management’s progressive efforts to streamline its operations with expectations of improved margins,” it said.
“However, we believe the stock, which is currently trading at 53.8 times price earnings, is already fully valued.”
Nestle (Malaysia) started in Penang in 1912 as Anglo-Swiss Condensed Milk Company before moving to Kuala Lumpur in 1939. Now, Nestle has eight factories and is headquartered in Mutiara Damansara.
Nestle Malaysia is the biggest halal producer in the Nestle world, marketing more than 500 halal products with leading household brand names.
As producers of well-known household brands such as Milo, Maggi and Nescafe, Nestle’s earnings visibility remains stable.
The group has consistently deliverednetearningscumulative annual growth rate (CAGR) of eight per cent in the past 10 years. Nestle Malaysia was able to achieve stable growth due to the affordability and innovativeness of its products.
Its sheer size and established presence will cement its position as the market leader in the FMCG space.
In 2016, Nestle developed its long-term growth strategy called Fuel to Grow, Innovate to Grow and Transform to Grow (FIT) strategy.
FIT aims to enhance efficiencies and encourage innovation by making the products better and less costly. We believe that streamlining efforts will continue to support Nestle’s margins.
“Also, Nestle will consolidate all its Milo manufacturing in the Chembong factory in Negri Sembilan as part of its strategy to establish the factory as the world’s biggest Milo Manufacturing Centre of Excellence.
“This move will allow Nestle to better allocate its resources to its more established brands and achieve economies of scale, further improving its margins.”