23 April 2012
Panasonic offers a hefty dividend, target price RM 21.62- MIDF Research
(PANAMY opening stock price today (23.4.2012) was RM 21.96)
Initiating coverage at RM21.60 with a neutral rating and target price of RM21.62: Panasonic Malaysia is involved in the manufacturing and sales of electrical home appliances, batteries and related components. The Panasonic brand has emerged as one of the most reputable brand names for electrical home appliances in Malaysia.
The Panasonic Group is one of the leading global electrical home appliance manufacturers, with business operations in more than 130 countries. With nearly 50% of its shares held by its parent company, Panasonic Malaysia is closely connected to its parent. This is an advantage as it is able to leverage the expertise and technological advances of its parent company in coming up with innovative products for the Malaysian market.
Panasonic Malaysia has registered an impressive net earnings growth for the last few years, with a compound annual growth rate (CAGR) of 16.1% over the last three years. This was attributed to the strong revenue growth, which registered a CAGR of 10.5% for the last three years, and from the reduction in costs and expenses. Panasonic Malaysia has consistently maintained a healthy balance sheet, with zero gearing and a strong net cash position of RM501 million as at end-FY11. This can be attributed to its strong operating cash flow, which is more than enough to sustain its working capital and capital expenditure requirements.
With its strong cash position, Panasonic Malaysia has been consistently rewarding its shareholders with steady dividend payouts. More impressively, with its strong operating cash flow, the gross dividend payout ratio has exceeded 100% for the past few years, with the most recent payout ratio of 107% for FY11.
Even though the company doesn’t have a fixed dividend policy, we expect Panasonic Malaysia to continue churning out substantial dividend payouts to its shareholders.
We are initiating our coverage on Panasonic Malaysia with a target price of RM20.48 derived from 15 times FY13 price-earnings ratio, based on its three-year historical PER ratio average. We like the company due to its strong brand name, good management, strong earnings growth and hefty dividend. However, we believe the stock is fairly valued at the current price, thus limiting its upside potential.