Thursday, October 23, 2014

OFI (Local Snack Food Mfg) - Growth but losing of profit margin on competition

While multinational consumer food companies listed like Nestle and DLady command premium valuations, there are a number of smaller homegrown companies with good track records and brand names, trading at much lower valuations.

OFI is one such company, offering lower valuations, a cash rich balance sheet and bank equivalent dividend yield. It is a leading snack food and confectionery manufacturer, producing a wide range of snack food products.

The snack food industry is highly competitive and OFI has countered competition by constantly focusing on R&D to create new products. It has also invested in automation to enhance capacity and margins, especially to counter the impact of fluctuating commodity prices.

Its brands have also made a significant impact overseas with exports now (Oct 2014) overtaking local sales. Exports accounted for 52.3% of its total sales in FY2014. Sales to local made up the balance.

Over the last five years, its revenue has increased from rm125.7 million to rm226.9 million while net profit increased fro mrm12.4 million to rm16.2 million. However, its net profit margin is drop from 10% to 7%. (Instead of Nestle net profit margin increase from 9.4% (2009Y) to 11.7% (2013Y))

The company has a strong balance sheet with net cash of rm20.2 million as at end of June 2014. This is equivalent to rm0.34 per share.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.