Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on May 28, 2018

Ajinomoto (Malaysia) Bhd
(May 25, RM22.40)
Maintain hold with an unchanged target price (TP) of RM22.75:
Ajinomoto (Malaysia) Bhd’s net profit for the fourth quarter of financial year 2018 (4QFY18) ended March 31, 2018 dropped 90% year-on-year (y-o-y) to RM14.7 million due to the absence of a RM145 million gain from compulsory acquisitions of its land and plant for the mass rapid transit project. Excluding the one-off gain recorded in 4QFY17, 4QFY18 operating profit grew 16% y-o-y to RM16.6 million, while profit before tax (PBT) increased 18% y-o-y to RM19 million. Quarterly revenue was flat at RM115 million as a decline in industrial products (-8% y-o-y to RM29.3 million) was mitigated by an increase in consumer products (+3% y-o-y to RM85.7 million). Net profit for the quarter dropped 14% quarter-on-quarter (q-o-q) due to the absence of tax reversal, while revenue rose 5% q-o-q as a gain in consumer products (11% q-o-q) absorbed the decline in industrial products (-10% q-o-q). Compared with the previous quarter, the operating margin was unchanged at 14%, as consumer products saw an increase of three percentage points (ppts) to 14%, while industrial products declined 3ppts to 17%.

 

For the full year, net profit dropped 70% y-o-y to RM56.3 million due to a gain from disposal of land and plant in FY17. Without the exceptional gain, operating profit declined 4% y-o-y to RM57.7 million but PBT grew 1% y-o-y to RM67.1 million, thanks to a higher interest income of RM9.9 million (versus RM5.5 million in FY17). Full-year revenue grew 4% y-o-y to RM436.3 million as revenue from consumer and industrial segments increased 3% and 7% y-o-y respectively.

As at March, Ajinomoto was in a net cash position with a cash reserve of RM296.7 million versus RM281 million in 3QFY18. The company announced a dividend of 46.5 sen per share, translating into a yield of 2.1%. The dividend payment is within our expectation of 48 sen per share.

Full-year net profit of RM56.3 million met our FY18 forecast of RM54 million, while cumulative sales of RM436.3 million hit our full-year forecast of RM435 million. As such, we maintain our forecasts for FY19 and FY20.

Despite dominating the monosodium glutamate market, Ajinomoto faces competition in other food and seasoning products from local brands and overseas producers. The removal of the goods and services tax could result in lower retail prices but we see little upside due to the inelastic nature of its products. We maintain “hold” at an unchanged TP of RM22.75 based on 3.1 times FY18 price-to-book forecast, implying +1.5 standard deviation to its three-year mean of 2.12 times. — JF Apex Securities, May 25

 

      Print
      Text Size
      Share