Tenaga Nasional Berhad (TENAGA) – Our Electrical Giant

Tenaga Nasional Berhad (TENAGA 5347)

TENAGA is the largest player in generating and providing electricity in Malaysia. I would argue to the point of being monopolistic.

They’re diversified geographically through equity ownership in the UK, Turkey, Saudi Arabia, Kuwait, India an Indonesia and Pakistan.

The company’s profits are tied heavily to foreign currency exchange rates, coal and gas prices.

The Numbers

TENAGA 2017 Financial Summary 5 Year
TENAGA 2017 Financial Summary

Increasing Profits Every Year

The electrical giant has been generating increasing revenue and profits consistently for 6 years now. One of the key criteria when I pick a stock to purchase.

With increasing profits comes increasing dividends for me as a shareholder.

Increasing Shareholder Equity Every Year

For 6 years now, TENAGA has consistently increased its Shareholder Equity also known as Net Assets annually. This is another huge check mark in Tenaga’s favor. 

We as shareholders will want a company that is constantly increasing its net assets. More assets mean more ways of generating income and also increase in stock prices.

Borrowings and Gearing

Total borrowings has increased to RM38.8 billion in 2017 with the gearing at 40.3%. An increase in borrowings is only worrying when the revenue decreases.

I do hope to see the gearing reduce to below the 40% mark in the future though.

Dividend Growth Perspective

TENAGA is a huge company, generating megawatts in electricity and dividends to its shareholders.

With the increasing profits every year, I’m not worried about the company delivering proportionally increasing dividends every year.

Valuation

At the time of writing, TENAGA is trading at RM13.980, at a P/E of 11.49.

The company is a little undervalued at the moment. I’ll continue to monitor the stock and purchase more when it drops below the RM13 mark again.

 

End.

TENAGA
Bought Price – RM14.12
Current Price – RM13.98
Capital Gain – (-0.99%)
Total 2018 Dividends – RM516,80
Dividend Yield – 3.66%

Disclosure: I hold 1,000 units of TENAGA shares in my Freedom Fund portfolio.

I will continue to hold onto TENAGA and look out for buying opportunities.

As always, my opinions and strategies are never intended to be a buy/sell recommendation. The strategy used has worked for me and it is for you to decide if it can be implemented into your own financial plan. Always do your own research and due diligence before investing.

A list of good dividend stocks in Malaysia can be found hERE.

Nestle (Malaysia) Berhad – Household Food Products in Malaysia

Nestle's Product Portfolio

Here’s a company whose products you’d definitely find around your household as a Malaysian. Boasting a huge range of food products, NESTLE has its tentacles everywhere.

While NESTLE has had to deal with its fair share of criticisms (aka the Milo incident), it has bounced back from it with a range of new products. And new profits.

Nestle Malaysia 2017 Annual Report

This here analysis is based on NESTLE’s 2017 annual report which can be downloaded here: nestle_annual_report_2017

Being awarded the ‘Highest Return on Equity Over the Past Three Years’ is no small feat.

NESTLE AGM

Also, NESTLE had quite a turnout at this year’s AGM with a very supportive base of shareholders.

I’ve got videos of the fun-filled fare up on my instagram.

Understanding the Business and its Products

Nestle's Product Portfolio
Nestle’s Product Portfolio

You would’ve been living under a rock if you fail to recognise just one of these household names. The products shown here has crept into the lives of Malaysians since we were children.

Let me paint you a picture.

You’ve had Nestle Milk when you were young. You remember the Milo trucks parked at your school compound serving free cups of chocolate goodness. You somehow recall that annoying Mat Kool song cruising round your neighbourhood.

And as you got older, you went to college where you had to tighten your belt and save some money so you filled your stomach with Maggi for breakfast, lunch and dinner. You stayed up late at night studying, buzzed on Nescafe.

What’s next you say?

You get a new job at some high-flying company, what’s that coffee machine you find in your pantry? Nestle again. Your boss pays Nestle every month to keep the machines churning. You enjoyed late night outs with your friends and colleagues at the mamak. Guess what your resident Ah-ne uses in his food and drink? Nestle.

Hell, you even remember them ‘Take a Break, Take a Kit Kat’ ads! Your parents and grandparents are probably taking Nestum in the morning and Omega at night for their bones and stuff.

My point being, Nestle’s products are here to stay for the foreseeable future. And you my friend, have been lining the pockets of NESTLE shareholders since you were 5.

 

Facts and Figures

Nestle Malaysia Growth
Source: Yahoo Finance

Investor’s realized the value of NESTLE in 2018, in a huge way. The company’s stock price has almost doubled since 2017, despite their latest Milo Incident.

I do not foresee any big jumps in the share price in the near future. Neither do I see too big of a dip for the company. At the current price of RM147.90, NESTLE’s dividend yield is below 2% the mark. My dividend yield for the stock, because I bought it at an average price of RM66.88 is at 4.04%.

NESTLE has had a continuous increase in net profit since 2014. As a rule of thumb, companies offering food products like Nestle are able to keep up with inflation.

 

Dividend Growth Perspective

NESTLE has been paying dividends consistently. I’ve held the shares since 2014.

Dividend yield was at 4.56% (2015), 4.04% (2016) and 4.04% (2017). However, with the sudden surge in share price and company growth, we should see dividends increase over the coming years.

Investors shouldn’t expect this metric to go sky-high since growth in the industry is somewhat limited.

Valuation

With the recent price increase, NESTLE is trading at 53.71 P/E.

They’re currently overvalued in my opinion. With everything factored in, I would definitely wait on this stock. Dividend history isn’t there to back up a strong buy signal.

An added note, I’m sure I’ll get many comments and messages saying Nestle is ‘expensive’. Technically it is because to buy the minimum number of 100 shares, you’d have to pay RM147.90 * 100, which comes up to RM14,790 at the current price.

However, if you’re serious about investing, get serious about saving your money. NESTLE is a worthwhile investment and it has been an invaluable defensive stock in my portfolio.

 

End.

NESTLE

Bought Price – RM66.88

Current Price – RM147.90

Capital Gain – 121.14%

Total 2018 Dividends – RM410 (so far)

Dividend Yield – 3.07%

Disclosure: I hold 200 units of NESTLE shares in my Freedom Fund portfolio. At its current trading price of RM147.90, I’m up 121% on the stock.

I will continue to hold onto my Nestle stocks for now, without adding any to the portfolio.

As always, my opinions and strategies are never intended to be a buy/sell recommendation. The strategy used has worked for me and it is for you to decide if it can be implemented into your own financial plan. Always do your own research and due diligence before investing.

A list of good dividend stocks in Malaysia can be found hERE.