Oriental Food Industries Holdings Bhd
While multinational consumer food companies listed on Bursa Malaysia like Nestle (M) and Dutch Lady Milk Industries command premium valuations, there are a number of smaller home-grown companies with good track records and brand names, trading at much lower valuations.
OFI is one such company, offering decent valuations, a cash-rich balance sheet and bank-equivalent dividend yield. OFI is a leading snack food and confectionery manufacturer, producing a wide range of snack food products. Its notable brand names include Super Ring, Rota, Jacker and Oriental.
The snack food industry is highly competitive and OFI has countered competition by constantly focusing on research and development to create new products. It has also invested in automation to enhance capacity and margins, especially to counter the impact of fluctuating commodity prices.
OFI’s brands have also made a significant impact overseas, with exports now overtaking local sales. Export sales saw a 10.7% jump in FY14, and accounted for 52.3% of total sales. Sales to the local market rose 3.2%, and accounted for the balance of 47.7%.
Over the last five years, OFI’s revenue has increased from RM125.7 million to RM226.9 million, while net profit increased from RM12.4 million to RM16.2 million. In FY2014, revenue rose 7.0% while net profit jumped 26.6%. The company has a strong net balance sheet with net cash of RM20.2 million as at end of June 2014. This is equivalent to RM0.34 per share, or 12.5% of the current share price of RM2.71.
In FY14, it paid dividends of 8 sen per share, which translates to a yield of 3.0%. For a company with strong brand names, the stock is trading barely above book value, at 1.1 times book with a trailing 12-month P/E of 11 times.
This article first appeared in The Edge Financial Daily, on October 23, 2014.