Being in the gigantic flavouring manufacturer,
Ajinomoto has long established its branding throughout the market. Product such
as salt, seasoning, industry use flavouring is well diversified in the company.
The only challenging competition for Ajinomoto in Malaysia is Maggie which
is a subsidiary of Nestle. As flavouring requires a little R&D which is not
survival purpose, Ajinomoto find its way up without much capital expenditure.
Establishing a number of subsidiary under the name of Ajinomoto takes a lot of
time, hence it is not easy for other firm to enter and dominate the market
which is favourable for the existing firm. Despite the stability of food
industry, Ajinomoto faces fallout on 2009 due to 31.69% of its revenue is
generated from overseas such as middle east and other Asia countries.
Considering its ability to generate increasing earnings in the future is high
as the need of preservative is widely recognized especially in the food
industry regardless of household or business owners especially with its well
established brands together with well diversified of product lines to satisfy
customers.
However, there is underlying risks where there
is global trend of recognizing healthy consumption practices where flavouring
such as MSG( MonoSodium Glutamate) is being boycotted by some parties. Also, it
is affected by international financial crises as shown in 2009 where the
earnings are dropped to RM0.08 per share as over 30 percent of the revenue is
generated internationally.
Based on the Cash Flow from operating activities
for the past ten years, it fluctuated wildly during financial crises as some of
its holdings may consist of high risk securities. Return on asset and equity is
not showing satisfactory rate as of 7
and 8 percent respectively(standard for both is 15 and 10%)as it reflects low efficiency.
Cash flow under 2009 appears to be doubtful as there was positive cash inflow
of 10 million resulted from disposal of shares although the company only
possess RM4million worth of shares. The company is not consistent with its
earnings and efficiency ratios. Price earning is retrieved by using the lowest
market price in the past one year divided by operating cash flow per share. The
price earning of 8.4 is rather low where it indicates the share is still within
the range of affordability. Also, the book value is worth RM4 per share which
is lower than the current market price of RM4.88 where it shows the value of
net assets is not up to the price of share. Overall, quantitative factor is not
showing desirable results where it is up to further timing to consider the investment
of this share.
Stock: AJI Code: 2658 Company: AJINOMOTO (MALAYSIA) BERHAD
