Nestle outlook remains positive despite headwinds

KUALA LUMPUR: Affin Hwang Capital research believes the macro backdrop remains supportive of Nestle (Malaysia) Bhd’s prospects despite consumer sentiment moderating in 4Q18.

It added that the response has been encouraging for the group’s new product offerings.

However, rising raw material prices in 2019 should be mitigated by a strengthening ringgit and further operating efficiency gains, it said.

Affin Hwang maintained its sell recommendation on Nestle with a lower target price of RM99.70, mainly due to the stock’s stretched valuations.

The research house said Nestle’s recently announced 2018 core net profit of RM682mil fell short of its expectations although it met consensus estimates.

According to Affin Hwang, the results variation was due to higher-than-expected A&P expenses and taxes incurred in 4Q18.

Core earnings of RM681.6mil, which was up 9.2% year-on-year (y-o-y), was driven by higher revenue of RM5.52bil, up 4.9% y-o-y.

Nestle cited hgher domestic spending amid improved consumer sentiment as well as higher export sales, with a strong reception for new products as reasons for the improved revenue.

Source : TheStar