NESTLE (4707) - Nestle (Malaysia) - New 3-in-1 coffee unveiled
Target RM74.94 (Stock Rating: HOLD)
Nestle introduced its newly invented “Nescafe Blend and Brew” during its analyst briefing today. This new product, which is produced using its patented technology, is likely to make an impact on the coffee mix segment. This, coupled with lower raw material prices, should partially mitigate the effect of slower consumer spending and higher A&P expenses. We maintain our FY15-17 earnings forecasts and DCF-based target price. We also keep our Hold call on the stock. We prefer QL Resources.
What Happened
We attended Nestle’s FY14 briefing today that was hosted by the new country Finance & Control Executive Director Martin Kruegel, whose appointment took effect on 1 Oct 2014. Approximately 30 fund managers and analysts attended the briefing. The key takeaways were (1) half of the domestic sales growth was driven by higher pricing, with the remaining being driven by stronger sales volume, (2) export sales are expected to stabilise in 2015, (3) its new patented innovation “Nescafe Blend and Brew” is expected to make an impact on the coffee mix segment, (4) Nestle is planning to invest substantially on A&P activities in Feb-Apr 2015 to take advantage of pre-GST buying, and (5) capex is estimated to be RM204m in 2015.
What We Think
Aside from its newly invented coffee mix, there were no other major surprises from the briefing. We expect 2015 to be a softer year given the slower consumer spending due to the implementation of GST. In addition, Nestle is also planning to spend substantially on A&P in Feb-Apr 2015 to ride on the pre-GST buying as well as to promote its new product “Nescafe Blend and Brew”. Fortunately, this will be partially buffered by (1) the potential strong sales from its new coffee, and (2) lower raw material prices, whose effect should kick in as its inventories deplete. Considering the positive results from its survey, its new “Nescafe Blend and Brew” should help to boost sales as consumers will now be able to enjoy tastier brewed coffee at home.
What You Should Do
We do not recommend investors to add. We expect consumer spending to be weak in 2015 but Nestle should be able to sail through the tough period given its large market share and strong brand name. Its decent dividend yield of >3% will help support its share price.
Source: CIMB Daybreak - 25 February 2015
Target RM74.94 (Stock Rating: HOLD)
Nestle introduced its newly invented “Nescafe Blend and Brew” during its analyst briefing today. This new product, which is produced using its patented technology, is likely to make an impact on the coffee mix segment. This, coupled with lower raw material prices, should partially mitigate the effect of slower consumer spending and higher A&P expenses. We maintain our FY15-17 earnings forecasts and DCF-based target price. We also keep our Hold call on the stock. We prefer QL Resources.
What Happened
We attended Nestle’s FY14 briefing today that was hosted by the new country Finance & Control Executive Director Martin Kruegel, whose appointment took effect on 1 Oct 2014. Approximately 30 fund managers and analysts attended the briefing. The key takeaways were (1) half of the domestic sales growth was driven by higher pricing, with the remaining being driven by stronger sales volume, (2) export sales are expected to stabilise in 2015, (3) its new patented innovation “Nescafe Blend and Brew” is expected to make an impact on the coffee mix segment, (4) Nestle is planning to invest substantially on A&P activities in Feb-Apr 2015 to take advantage of pre-GST buying, and (5) capex is estimated to be RM204m in 2015.
What We Think
Aside from its newly invented coffee mix, there were no other major surprises from the briefing. We expect 2015 to be a softer year given the slower consumer spending due to the implementation of GST. In addition, Nestle is also planning to spend substantially on A&P in Feb-Apr 2015 to ride on the pre-GST buying as well as to promote its new product “Nescafe Blend and Brew”. Fortunately, this will be partially buffered by (1) the potential strong sales from its new coffee, and (2) lower raw material prices, whose effect should kick in as its inventories deplete. Considering the positive results from its survey, its new “Nescafe Blend and Brew” should help to boost sales as consumers will now be able to enjoy tastier brewed coffee at home.
What You Should Do
We do not recommend investors to add. We expect consumer spending to be weak in 2015 but Nestle should be able to sail through the tough period given its large market share and strong brand name. Its decent dividend yield of >3% will help support its share price.
Source: CIMB Daybreak - 25 February 2015
