All-round positive outlook on Nestle Malaysia
KUALA LUMPUR: Analysts are generally positive on Nestle (Malaysia) Bhd’s (Nestle) outlook, with expectations of stable revenue growth and upbeat net profit in financial year 2019 forecast (FY19F).
Affin Hwang Investment Bank Bhd (Affin Hwang Capital) for one, continued to expect a still-positive local macro environment to support Nestle’s domestic growth prospects, going forward.
“Yet, we remain cautious of an uptick in raw material prices, which could weigh on margins, while there could be some volatility in demand arising from Nestl?’s export markets (approximately 22 per cent of group turnover), in our view,” AmInvestment Bank said.
As for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), it expected stable revenue growth inline with healthy private consumption driven by the government initiatives to deal with the rising cost of living and Nestle’s strong product innovation.
“In addition, the group has undergone operating efficiency initiatives implementation in FY18,” MIDF Research said.
“This includes establishment of global procurement hubs to centralise procurement activities, more efficient logistic handling and divestment of non-core Chilled Dairy business in order to focus on its Milo operations.
“These allow the company to leverage on economies of scale to deliver cost savings.”
Therefore, the research arm expected the group to record stable profit margins despite the volatility in input material and increasing operational costs.
Meanwhile, AmInvestment Bank Bhd (AmInvestment Bank) believed that the outlook for Nestle’s net profit in FY19F would be upbeat.
“Although raw material prices may rise, this would be compensated by operational savings from the streamlining of the group’s supply chain,” the research firm said.
“We like Nestle for its established presence, position as the market leader in the fast-moving consumer goods (FMCG) space and efforts to streamline its operations, which should translate into improved operating profit margins.”