Dutch Lady Milk Industries Bhd.

Just realised during this early June, that DLady is such a good company which suit my long-term-growth strategy. Not much research had been done before I decided to take it into my portfolio .

Bought it at RM47.20，a price equivalent to PE ~24，and net DY of 5.5%.... which i think is quite reasonable though not very attractive.


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company's financial performance review:

(click here for full view)

summary:

• Revenue CAGR stood ~ 9%p.a. for the past ten years. 
• Ten years profit CAGR at ~23%.  
• an up-trend of profit margin and ROE.
• continuous growth of dividend.

The growth of revenue had slow down a bit in past five years, but the profit growth rate still stood above 20%p.a., due to the continuous improvement on margin.

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The company had just completed its expansion plan which could boost its UHT milk capacity by 50%. There's still many sub-segment of milk products market that DLady is yet to venture into. These markets provide sustainability of its long-term growth.

I'm quite optimistic about the company's new product -- DutchLady Chocolate Drink, which had just been launched last year. I believe it had a potential to gain a significant share in the chocolate drink market.


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Besides its long-term growth potential, DLady poses some attractive criteria:

• It's the leader in its market (liquid milk and milk powder) -- had a market share higher than Nestle。
• Focus on simple product -- selling liquid milk, and other milk products.
• Focus on single market -- Malaysia and Singapore, that's all.
• High profitability -- ROE had been >30% for many years, and now up to ~50%.
• Strong cashflow -- which translated into good dividend record.
• Huge cash, zero debt.

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My expectation on DLady:

• Continue to be a Leader, and further increase its share in milk product market.
• Revenue grows at a 7~10% rate, while profit growth rate stand > 10% p.a.
• Dividend maintained at same level as 2012. (RM2.60 per share)
• (further reading: The sustainability of DLady's "high" dividend.)

Expected return on investment, ~15% p.a.
Expected period of investment, 5~10 years.


now DLady weight about 7% in my portfolio.

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