DUTCH LADY MILK INDUSTRIES BERHAD Value Evaluation

Dutch Lady, a company which major in manufacturing in dairy products since 1988 has been building its prestigious branding with outstanding products ranging from baby use to the consumption of regular family. With its deep blue packaging, its product lines are easily recognizable compared to others. As to the quality of products, the company obtains various recognitions from ISO, HALAL and trusted brand awards which reflect the Dutch Lady firm stand in the market. When I come across Dutch Lady’s products, I realize that it breaks its consumable milk line into fresh milk and ordinary milk with lower price. In order to obtain more market share, it provides options for consumer to choose. In terms of capital expenditure, the company doesn't incur any R&D costs which is probably being bear by its the parent company Frint Beheer IV BV who owns over 50 percent of Dutch Lady Berhad’s shares. Therefore, Dutch Lady is able to benefit from all the research facilities without using their own capital.

 Recent milk scandals from the China’s milk scandal which reports thousands and thousands of milk contamination has shaken the milk manufacturer industry. Moreover, the industry is burdened more with the Fonterra Milk Scandal which exports milk formulas to most of the dairy products manufacturers worldwide.

Based on the FCF for the past ten years, cash flow from operating activities for Dutch Lady has been increasing in a steady manner. More surprisingly, it is able to withstand the global financial crises and march upwards. As for the ratios, it is both up to standard which reflects and efficiently managed company. With good cash management, future earnings of Dutch Lady is no doubt going to climb in a steady pace. With its intrinsic value estimated at RM43.38 after 15% margin of safety, the current price has fully reflected its value.

Stock: DLADY Code: 3026