Dutch Lady Milk Industries (M) Bhd (Dutch Lady) has its roots traceable to year 1950. At that time, Friesland, its parent company was exporting dairy products to local importers and wholesalers in British Malaya. Subsequently in 1954, the parent company set up a new trading company in Singapore to sell and market its sweetened condensed milk products in British Malaya.

Shortly after, in 1963, it set up a milk factory in Petaling Jaya and the site, as of today, remains fully operational. The company was listed in 1968. Today, Dutch Lady has solidified its position as the leading dairy company in Malaysia, valued at RM 3.92 billion in market capitalization presently.

In this article, I’ll revisit its fundamentals, bring an update on its latest financial results, and evaluate its investment potentials at its current stock price. Hence, here are 10 things to know about Dutch Lady before you invest.

  1. Product Portfolio
    Dutch Lady, by itself, is a well-known milk brand in Malaysia and needs no further introduction. Its portfolio of products include ready-to-drink milk, chocolate mix, and yoghurt. In 2017, Dutch Lady has received two key awards namely, the Halal Fast Lane Award and the Halal White List Award, by JAKIM in recognition of its excellences in Halal compliance in food & beverage (F&B) manufacturing activities in Malaysia.


  2. Revenue
    Dutch Lady has achieved steady rise in revenues from RM 711.6 million in 2008 to RM 1.00 billion in 2014. Subsequently, it maintained its sales at around RM 1.00 billion levels for the past 3 years with negligible rate of growth during the period.



Source: Dutch Lady’s Annual Reports


  1. Profitability
    In tandem with sales growth, Dutch Lady has achieved rapid increase in its shareholders’ earnings, growing from RM 42.6 million in 2008 to RM 138.3 million in 2013. Since then, Dutch Lady had sustained its earnings at RM 100 – 150 million levels from 2014 to 2017. Earnings reported for year 2015 and 2016 were higher at RM 140 million levels because costs for raw materials incurred were lower. Meanwhile, profits recorded for 2014 and 2017 were lower due to higher cost of raw materials incurred in both of these years.



Source: Dutch Lady’s Annual Reports


  1. Return on Equity (ROE)
    In a glance, Dutch Lady had increased its ROE significantly from 26.38% in 2008 to 113.18% in 2017. It indicates that Dutch Lady is not only just a highly profitable company but also one which is capital efficient. In its case, Dutch Lady does not need to raise equity from investors or retain and reinvest business profits to generate higher profits in the future. It is evident as Dutch Lady has reduced its shareholders’ equity gradually through making huge dividend payouts to its shareholders since 2011.



Source: Dutch Lady’s Annual Reports


  1. Cash Flow Management
    From 2008 to 2017, Dutch Lady generated RM 1.25 billion in operating cash flows. Out of which, it has:

    – Spent RM 151.1 million in capital expenditures (CAPEX).
    – Paid out RM 1.08 billion in dividends to its shareholders.

    Evidently, Dutch Lady is a cash-cow business. It does not rely on raising both debt and equity to stay afloat. It does not invest much on growing its operations and chooses, instead, to pay out most of its cash receipts to its shareholders in the form of dividends.


Source: Dutch Lady’s Annual Reports

  1. Balance Sheet Strength
    As at 30 September 2018, Dutch Lady has no long-term borrowings and has RM 132.8 million in shareholders’ equity. It has RM 271.3 million in current assets and RM 244.8 million in current liabilities and thus, has a current ratio of 1.11. Thus, Dutch Lady’s balance sheet remains strong.


  2. Latest Financial Results
    For the past 12 months, Dutch Lady has generated as much as RM 1.05 million in revenue and RM 120.1 million in shareholders’ earnings or as much as RM 1.88 in earnings per share (EPS). In that period, it had paid out RM 2.00 in dividends per share (DPS). Hence, Dutch Lady sustained its financial results for 2018 at its 2017 levels.

Figures in RM ‘000 unless stated otherwise

PeriodRevenueEarningsEPS (Sen)DPS (Sen)
Q4 2017269,06020,98032.80.0
Q1 2018266,11434,23053.5110.0
Q2 2018254,24830,70248.00.0
Q3 2018257,05234,21353.590.0
Total1,046,474120,125187.8200.0

Source: Dutch Lady’s Quarterly Reports

  1. P/E Ratio
    As at 31 January 2019, Dutch Lady is trading at RM 61.22 a share. Thus, its current P/E Ratio is 32.60, marginally lower than its 10-Year Highest of 33.71.

  1. P/B Ratio
    As at 30 September 2018, Dutch Lady has reported to have RM 2.07 in net assets a share. Hence, its current P/B Ratio is 29.57. From a longer view, Dutch Lady’s P/B Ratio has increased rapidly as a result of higher stock prices and continuous reduction in shareholders’ equity over the last 5 – 6 years.


  1. Dividend Yield
    If Dutch Lady is able to maintain its DPS at RM 2.00 per annum, hence, its dividend yield is 3.27% per annum, the lowest since 2009.


VIA’s Verdict

Dutch Lady has recorded a period of rapid growth in revenues and profits from 2008 to 2013 before hitting a plateau over the last 4 – 5 years. As a result, stock prices of Dutch Lady has mirrored its financial results over the 10-year period.

Source: Google Finance

Source: Dutch Lady’s Annual Reports

It is yet another example of stock prices mimicking stock profits in the long run, a testimony of why value investing is an efficient method of investing capital in the stock market.

Question: ‘Is this a good time to buy Dutch Lady?’

Answer: ‘Obviously, stock prices today is valued at its highest P/E Ratio with its lowest dividend yield. So, if you choose to buy today, you are investing in it at a price less attractive compared to its shareholders who bought it earlier at stock prices cheaper than RM 61.22 a share.’

At the end, you’ll call the shots, whether or not, you are willing to accept Dutch Lady at RM 61.22 a share. If not, shop for others which can give better value.

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