KUALA LUMPUR (Apr 8): Monosodium glutamate (MSG) producer Ajinomoto (M) Bhd rose as much as 3.18% after it was chosen as Insider Asia’s stock of the day and featured on The Edge Financial Daily today.
At 4.11pm, the counter pared gains to trade at RM6.49, up 19 sen or 3.02%, with 118,500 shares changing hands. At RM6.49, it has a market capitalisation of RM383 million.
Insider Asia said they like Ajinomoto (fundamental 1.45; valuation: 2.0) for its strong franchise and market-leading position.
Insider Asia said the valuations are attractive as the stock trades at 1.37 times its book value and a trailing 12-month price-earnings (P/E) of 12.85 times. Excluding cash, P/E stands at only 8.6 times.
“By comparison, food and beverages (F&B) manufacturers with strong brands like Nestle (M) Bhd (fundamental: 1.35; valuation: 1.5), Fraser & Neave Holdings Bhd (fundamental: 2.1; valuation: 1.1) and Dutch Lady Milk Industries (fundamental: 2.1; valuation: 1.5) are trading at historical PER of 26 to 31 times. Even compared to peers with similar market capitalisation, this steady dividend-paying stock still looks comparatively cheap,” it added.
It also pointed out that Ajinomoto’s dividend payout ratio has been consistently above 40% since financial year ended Mar 31, 2010 (FY10). Dividends totalled 18.5 sen in FY14, giving a yield of 2.98%.
Ajinomoto is debt-free and has built up a large cash pile, which stood at RM124.8 million at end of 2014, up from RM56.4 million at the end of FY10.
Cash per share of RM2.05 represents a substantial 33.1% of its current share price.
In 2014, Ajinomoto derived 65.3% of its sales from Malaysia. Like Nestle, the company is a key manufacturing hub for HALAL products for the group. About 10.8% of its sales are destined for the Middle East market.
For nine months period in FY15 (9MFY15), its revenue was flat but net profit increased 5.7% year-on-year to RM24.0 million, due to lower energy prices and advertising expenses.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)