Invest into Nestlé Malaysia Berhad (4707)

NESTLÉ (M) Bhd’s share close RM145.50 on last Friday 17 May 2019. For past one year, it has hoovering between RM143 and RM150. Nestle is the highest-priced counter on the local exchange. Nestlé is the confectionary giant from Swiss

The fast-moving consumer goods maker now trades at 51.5 times, trailing 12-month earnings per share. Nestlé currently yields 1.92%, the yield is dropping with the price appreciated. If I can remembered correctly, the yield for Nestlé was 4% in year 2013 with the price hovering around RM68. Nestlé has grown its dividend every year since 1996, and its dividend has grown at a 12.5% annual clip since 2001. (Note: these rates are in the company’s reporting currency, the Swiss franc.)

I cannot forecast how will Nestlé grow in future. Looking back 40 years ago, my parent drink Milo, I drink Milo, and my son is consuming Milo everyday also. With this I have no doubt: 30 years from now, Nestlé will still be in business, and the company will be selling a lot more food and drink products than it is today.

Other than Milo, Nestlé other portfolio are big sounding names that most know and heard of like Kit Kat, Movenpick, Nespresso and many more. I just back from cuti-cuti Malaysia at Batu Ferringhi, Penang. During the 3 days there, my family brought a lot of Nestlé products like Milo, Nescafe, Maggi Mee, Kit Kat, Koko Crunch etc….

These are the kinds of products that tend to have stable demand, even in a recession. Times would really have to be hard for a person to forgo ice cream or chocolate candy.

My previous investment story

In 2013 June, I was introduced to value investing, is my first year investing to KLSE. One of the stock we evaluate is Nestlé. First impression is Nestle is damned ‘expensive’. It was cost around RM68 at that time, and it is the highest stock in the KLSE. Technically it is expensive because to buy the minimum number of 100 shares, you would have to pay RM68 x 100, which comes up to RM6,800 at that time. I still recalled that in the class, everyone saying it is expensive. The instructor told us, if you comment expensive, it will be even higher in the times to come. It is true that the price already double in just 6 years!

For current Price at RM145.50 x 100 shares = RM 14,550

Look back what I did at year 2013 with below details,

I bought in 200 shares of Nestlé Malaysia Berhad (4707) with average price of RM68.60. I am impatient and sold it after 1.2 years. Only able to pocket in 1% profit. What if I did not sell and hold till today?

 Based on the above, CAGR calculation, Nestlé Malaysia Berhad (4707) has performed at 13.52% growth rate. A phenomenal growth for a stock in just a span of 6 years. I looked like a dumb now if I am patience enough to hold it till now. I trust there are a lot of people out there like me.

My next investing Strategy for Nestlé

Nestlé is not as hard-hit during economic crises. AS you can see, even with one year of holding in 2013 till 2015 the price do not increased much. So let's not expect huge 10% – 20% jumps in stock price from Nestlé. Instead, you will get a steadily increasing flow of dividends and capital gains (long term).

While having lunch with my ex-colleague last Friday, since this is "Expensive" stock, she is suggesting to save up the monthly income to buy into Nestlé regularly, e.g 6 months for 100 units. or 12 months 100 units when there is yearly bonus payout. 

Below are the 2 strategies defined, you may re-do based on your ability.

What will be you comment? Do leave a comment below or suggestion.