‘Nestle will be able to continue operating in line with FIT strategy’
KUCHING: Analysts are positive that Nestle ( Malaysia) Bhd ( Nestle) will be able to continue operating efficiently to be in line with the group FIT strategy for sustainable growth.
According to the research arm of TA Securities Holdings Bhd (TA Research), management guided that the capital expenditure (capex) level will be normalising in between RM150 million to RM180 million for financial year 2017 (FY17) and FY18.
“Capex will be used for specific investments to improve on Nestle’s operational efficiencies namely centralised distribution centre for Nestle’s manufactured products,” it said.
TA Research believed that this is in line with Nestle’s FIT strategy to fuel, innovate and transform to grow the business.
The research arm was positive on this as it will benefit the operational efficiencies in the long run.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), ,anagement guided that the capex for the next three to four years will be between RM130 million to RM180 million.
As there will be one specific investment in FY17 which focuses on distribution segment, MIDF Research expected that FY17’s capex will fall at the higher end of the range given.
“Going forward, management guided that the export growth will remain solid but not as high as FY16 level,” the research arm said.
Taking this into account, MIDF Research expected that FY17’s revenue will grow at 4.1 per cent.
Meanwhile, TA Research expected Nestle’s FY17 and FY18 total revenue to grow by 2.5 per cent and three per cent respectively on the back of resilient demand and launch of new products.
Looking at the export sales, the research arm believed the weakening of ringgit will create better margin of sales for exports.
TA Reseasrch believed that Nestle will be able to negotiate for a lower financing rate for FY17 and FY18, therefore contributing to better expected profit before tax ( PBT) margin in FY17 and FY18 .
“Note that current PBT margin stood at a solid 15.1 per cent for FY16,” it said.
On the outlook, TA Research was positive that Nestle will be able to continue operating efficiently to be in line with the group FIT strategy for sustainable growth.
The research arm noted that, Nestle is also exploring additional sales channel through eCommerce where sales target is set at RM30 million for FY17, which will account for less than one per cent of total expected group revenue.
“Currently, this is only at its market testing phase so Nestle will be able to determine in the future on the best routeto-market for Malaysia,” the research arm said.
“This goes to show that Nestle is leading the industry by fuelling, innovating and transforming the way consumers purchase their food and beverages.”
While TA Research’s short-term view that weakening consumer sentiment has an inelastic effect to the pricing of Nestle products.