KUALA LUMPUR (Oct 26): Nestle (M) Bhd may spend more on marketing and advertising as the food and beverage manufacturer contends with fragile consumer sentiment, according to TA Securities Holdings Bhd.

In a note today, TA said Nestle had indicated this during the manufacturer's analyst briefing last Friday. TA said it was "cautiously optimistic on Nestle's outlook" after the briefing on expectation that substantial marketing and advertising investment could curb Nestle's profit margin.

"Going forward, management suggested heavy investment on marketing and promotions activities remains indispensable to mitigate the waning consumer confidence.

"As a result, this could suggest potential decline in margins in the future. Another possible risk could be coming from poor acceptance of newly innovated products as consumers may be reluctant to try new products that is out of their normal budget at the moment," TA said.

Nestle's analyst briefing last Friday followed the announcement of its third quarter financials a day earlier. Net profit rose to RM179.16 million in the third quarter ended September 30, 2015 (3QFY15) from RM150.08 million a year earlier. Revenue rose to RM1.22 billion from RM1.16 billion.

Cumulative 9MFY15 net profit climbed to RM490.94 million from RM452.08 million a year earlier. Revenue was, however, lower at RM3.64 billion versus RM3.7 billion. Nestle proposed a tax-free dividend of 65 sen a share for the quarter in review.

Today, Nestle managing director Alois Hofbauer told reporters in Shah Alam that the company had expanded its production capacity with its new factory in the area.

Hofbauer said Nestle invested RM288 million in the factory, which was the manufacturer's eighth Malaysian entity.

"This is one of the largest factory sites in Malaysia and in the Nestle world, employing over 2,000 Nestle factory staff," said Hofbauer, adding that the plant expansion was part of the group's long-term growth strategy in the country.

At 11.21am, Nestle shares fell eight sen or 0.1% to RM72, the stock's lowest so far today. A total of 3,200 shares changed hands.

(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.)