Earnings soar despite GST and soft consumer sentiment
AJINOMOTO Malaysia Bhd seems to be holding the fort up pretty well despite the implementation of the goods and services tax (GST) earlier this year, coupled with softer consumer sentiment experienced by many if not all consumer products.
It most recently recorded a 62.5% jump in earnings to RM12.38mil in the second quarter ended Sept 30, 2015 from RM7.62mil in the same quarter last year. The company’s performance was boosted by higher sales and better profitability, supported by stronger export sales.
Revenue was also higher at RM93.98mil compared with RM88.46mil in the previous year, due to stronger export sales in the umami segment while domestic sales was better in the food and seasoning segment.
This brought its first-half revenue to RM189.49mil, 8.5% higher than RM174.65mil Ajinomoto posted a year ago. Net profit during the period grew 43% year-on-year to RM22.68mil.
For a company with zero debt and some RM144.9mil in cash and cash equivalents as at its second quarter ended Sept 30, 2015, Ajinomoto’s current dividend yield stands just under 3%.
It recently paid out a 20-sen first and final single-tier dividend amounting to RM12.16mil for the financial year ending March 31, 2015. This translates to a 40.9% dividend payout ratio, slightly higher than 40.11% in 2014.
As at end-September, the company retained RM225.67mil in profits compared to RM201.27mil a year ago.
Although it is a 3% dividend yield company with more than RM100mil cash in the bank and no debt, Ajinomoto is actually one of the top dividend-yielding companies among its Asian peers.
It comes third after Thailand’s Theparos Ltd Co at 4.51% and Pakistan’s National Foods Ltd, whose dividend yield stands at 3.17%.
Ajinomoto’s other peers from China have dividend yields ranging from 0.1% to 1.39%.
The company, which manufactures and distributes monosodium glutamate (MSG) and related products, could be seen as a long-term play on its stable and growing earnings.
Based on its latest quarterly report, Ajinomoto’s earnings before interest, tax, depreciation and amortisation per share is around 0.23 times.
In terms of price-earnings (P/E) ratio, Ajinomoto is the lowest compared with its peers, according to Bloomberg. Its P/E ratio stands at 11.22 times compared with its closest peer Theparos at 23.46 times.
It is, however, the smallest in terms of market capitalisation at RM410.4mil, while the market capitalisation of its comparables are in the billions.
Ajinomoto’s share price has climbed almost 18% to RM6.75 from RM5.74 a year ago. Volume in the shares are, however, thin, at an average of 28,3361shares in the past year.
Ajinomoto is cashflow positive, with six-month net cash generated from operations standing at RM23.75mil, while investing activities was in the negative with RM1.97mil. This is in comparison to RM15.62mil in net cash generated from operations and negative RM1.27mil from investing activities.
As at end Sept, the company’s net assets per share stood at RM4.77, versus RM4.60 at the end of March 2015.
According to its latest quarterly financials, the only payables it has are trade payables amounting to RM22.07mil, other payables at RM27.07mil and tax payable at RM3.34mil.
The company has two major segments – the umami segment, and the food and seasoning segment.
The umami segment is the manufacturing and distribution of MSG and related products while the food and seasoning segment is the manufacturing and distribution of industrial seasonings, retail flavour seasoning and related seasonings.
Under the retail segment, it has eight different brands including Tumix, Aji-No-Moto, Seri-Aji, and Aji-Shio, among others.
Ajinomoto also trades goods such as industrial sweeteners and frozen foods. It also provides services related to the food industry.
The company was one of the first Japanese joint-venture companies set up in Malaysia when it started operations in 1961. Since then, it has become a household name for many Malaysian homes.
It currently exports its products to about 20 countries in Asia, the Middle East, South America, Africa and Oceania.
In a filing with Bursa Malaysia earlier this week, the company said it expects the challenging business environment to continue. “The production cost is expected to be pressured by price increases from suppliers in the coming months,” it said.
During this time, Ajinomoto’s management will focus on implementing effective sales strategies and improving the company’s operational efficiency.
Should earnings continue on an uptrend, Ajinomoto could see it being the flavour of the week for quite a while.
Did you find this article insightful?