Insider Asia’s Stock Of The Day: Ajinomoto

by **Cals** Wed 08 Apr 2015, 20:10

Insider Asia’s Stock Of The Day: Ajinomoto

By InsiderAsia / InsiderAsia | April 8, 2015 : 11:27 AM MYT

[size=14]Ajinomoto (M) Bhd ([You must be registered and logged in to see this image.] Financial Dashboard)
We like Ajinomoto (Fundamental: 1.45/3, Valuation: 2.0/3) for its strong franchise and market-leading position.

Valuations are attractive. The stock trades at 1.37 times its book value and a trailing 12-month P/E of 12.85 times. Excluding cash, P/E stands at only 8.6 times. By comparison, F&B manufacturers with strong brands like Nestle, F&N and Dutch Lady are trading at historical PER of 26-31 times. Even compared to peers with similar market capitalisation, this steady dividend-paying stock still looks comparatively cheap.

Ajinomoto is debt-free and has built up a large cash pile, which stood at RM124.8 million at end-2014, up from RM56.4 million at the end of FYMar2010. Cash per share of RM2.05 represents a substantial 33.1% of its current share price.

Dividend payout ratio has been consistently above 40% since FY2010. Dividends totalled 18.5 sen in FY2014, giving a yield of 2.98%.

Set up in 1961 as part of the Japan-based Ajinomoto Group, the monosodium glutamate (MSG) producer markets its flavour seasoning products under brands like AJI-NO-MOTO,

SERIAJI, TUMIX, and VONO. 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. The balance of sales comes from other Asian countries. Ajinomoto intends to continue expanding its product offerings and create brand awareness to drive future growth.

Sales and earnings have been steady, if not overly exciting over the past few years. Sales grew at a compounded annual rate of roughly 5%, on average, between FY2010-FY2014 while net profit ranged from about RM20 million to RM28 million.

For 9MFY2015, revenue was flat but net profit increased 5.7% y-y to RM24.0 million, due to lower energy prices and advertising expenses.

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This article first appeared in The Edge Financial Daily, on April 8, 2015.
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