I have been investing and trading in Singapore-listed companies over the past three years. Lately, I have started to study companies listed on the Hong Kong Stock Exchange (HKEX) – particularly those that have demonstrated growth in their top- and bottom-lines over the past 5 financial years, and sharing my researches here in The Singaporean Investor so that you can benefit from my work as well (with hope that you have enjoyed and have benefited from them.) You can read all my previous posts about Hong Kong-listed companies here.

One of the companies that have displayed this trait is a company by the name of Ausnutria Dairy Corporation Limited (SEHK:1717) – the company is in the business of offering high-end dairy and nutrition products, with sales coming from different geographical locations including the People’s Republic of China (“PRC”), North America, Europe, Russia, Australia, and the Middle East.

In this post, I will be sharing with you more about the company (so you will have a better understanding of its businesses; the above is just a nutshell of what it does), historical financial performance, debt profile, and dividend payout to shareholders (over a 5-year period), along with whether or not the company is considered to be trading at a discount or premium based on its current share price (I will be comparing its current valuations against its 5-year average which I have computed.)

Let’s begin…

A Brief Introduction to Ausnutria Dairy Corporation Limited

Founded in Changsha City, Hunan Province, PRC, in September 2003, Ausnutria Dairy Corporation was the first Chinese infant formula company to be listed on the HKEX (on 08 October 2009.)

Currently, the company has 10 factories around the world – 2 in China, 5 in the Netherlands, 2 in Australia, and 1 in New Zealand, with a diversified portfolio covering infant formula, toddler formula, adult formula, liquidity milk, and other nutrition products.

Some of the products by the company include (you can click on the respective links to learn more about the product offerings):

• 澳优 Allnutria (allnutria.com)
• 海普诺凯1897 (1897.com)
• Neolac 悠蓝 (neolac.com)
• Puredo 美纳多 (puredo.com)
• Eurlate 欧选, and OzFarm 澳滋 (eurlate.com.cn)
• Hollisure 合力素 (holisure.com)

Ausnutria’s 5-year Performance (between FY2015 and FY2019)

The company has a financial year end on 31 December.

In this section, I will be sharing with you its historical performance over a 5-year period – between FY2015 and FY2019:

Total Revenue and Net Profit Attributable to Shareholders (RMB’000):

	FY2015	FY2016	FY2017	FY2018	FY2019
Total Revenue (RMB’000)	RMB 2,103,534k	RMB 2,740,262k	RMB 3,926,466k	RMB 5,389,568k	RMB 6,736,153k
Net Profit Attributable to Shareholders (RMB’000)	RMB 50,645k	RMB 212,672k	RMB 308,133k	RMB 635,100k	RMB 878,390k

From the chart and table above, you can see that the company have grown its total revenue, and its net profit attributable to shareholders every single year for the past five years – the former have grown at a compound annual growth rate (CAGR) of 26.2%, while the latter improved by a CAGR of 76.9% – which is impressive in my personal opinion.

Gross Profit Margin, Net Profit Margin, and Return on Equity (%)

	FY2015	FY2016	FY2017	FY2018	FY2019
Gross Profit Margin (%)	28.0%	41.0%	43.0%	49.4%	52.5%
Net Profit Margin (%)	2.4%	7.8%	7.8%	11.8%	13.0%
Return on Equity (%)	3.9%	14.5%	17.7%	19.5%	21.9%

What’s even more impressive about the company is that it has recorded improvements in all three metrics over a 5-year period.

Debt Profile (RMB’000):

So far so good as far as the company’s financial performances over the years are concerned.

Moving on, I’d like to find out if the company is in a net cash (preferred), or net debt position over the years – when it comes to investing in a company, I would prefer to put my money in companies with minimal debt.

With that, let us look at Ausnutria Dairy’s debt profile over the years:

	FY2015	FY2016	FY2017	FY2018	FY2019
Cash & Cash Equivalents as at the End of 31 Dec (RMB’000)	RMB 307,620k	RMB 448,262k	RMB 635,650k	RMB 1,449,861k	RMB 1,674,541k
Total Borrowings (RMB’000)	RMB 946,189k	RMB 1,212,610k	RMB 1,972,184k	RMB 1,075,442k	RMB 1,203,790k
Net Cash/Debt (RMB’000)	-RMB 638,549k	-RMB 764,348k	-RMB 1,336,534k	+RMB 374,419k	+RMB 470,751k

Few observations to note:

• Its cash and cash equivalents have gone up every single year over the past 5 years
• While the company was in a net debt position between FY2015 and FY2017, the subsequent years saw the company reversing into a net cash position

Ausnutria Dairy’s Dividend Payout to Shareholders between FY2015 and FY2019

So, how has the company been rewarding its shareholders in terms of dividend payout? Let us find out in this section.

Ausnutria Dairy declares a dividend payout to shareholders on an annual basis, with the ex-dividend date usually in early-June (this has been the case since FY2017.)

The following table shows you the company’s dividend payout to shareholders over the years, along with its payout ratio:

	FY2015	FY2016	FY2017	FY2018	FY2019
Dividend Per Share (HKD/share)	HKD 0.03	HKD 0.05	HKD 0.10	HKD 0.15	HKD 0.22
Dividend Payout Ratio (%)	52.1%	26.4%	33.9%	27.9%	35.8%

Over the years, Austria’s dividend payout to shareholders have increased from HKD0.03 in FY2015 to HKD0.22 in FY2019 – with increases every single year, and a CAGR of 49.0% over a 5-year period.

As far as the company’s dividend payout ratio is concerned, I noticed that the company have maintained a payout ratio of under 40.0% over the years.

Is Ausnutria Dairy’s Current Share Price Trading at a Discount/Premium Currently?

Finally, let us look at whether at its current share price, is Ausnutria trading at a discount or premium based on its current vs. its 5-year average valuations (which I have calculated.)

At the time of writing, Ausnutria Dairy is trading at HKD16.72, and its current valuations are as follows:

P/E ratio: 27.0
P/B ratio: 6.0
Dividend Yield: 1.3% (computed based on a dividend payout of HKD0.22 in FY2019)

The company’s 5-year average valuations is as follows:

P/E ratio: 21.1
P/B ratio: 3.0
Dividend Yield: 1.8%

Looking at its current vs. its historical valuations, it seems that Ausnutria Dairy is currently trading at a premium – due to its higher-than-average current P/E and P/B ratios, along with a lower-than-average current dividend yield.

In Conclusion

Looking at the company’s historical statistics which I have presented above, I’m sure you agree with me that over the years, its performance have been impressive.

One of the risks I can immediately identify which may impact the company’s performances moving forward is negative press regarding its products, which may taint its brand name.

Having said all of that, this post is by no means a recommendation to invest in the company. As always, please do your own due diligence before you make any investment decisions.

Disclaimer: At the time of writing, I am not a shareholder of Ausnutria Dairy Corporation Limited.

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