An Investor’s Comparison Of The Business Fundamentals of Nestle Malaysia Berhad and Super Group Ltd

Nestle Malaysia Berhad (KLSE: 4707.KL) and Super Group Ltd (SGX: S10) are two companies that deal with fast-moving consumer goods (commonly abbreviated in the business world as FMCG).

The former is listed on Bursa Malaysia, the stock market of Malaysia while Super Group has been a listed company in Singapore’s market for a long time.

Investors who are comfortable investing in both Singapore and Malaysia might look at both Nestle Malaysia and Super and wonder which is the better FMCG outfit.

So, here’s a closer look at the fundamentals of the two companies to provide some useful data for said investors.

Business model

While Nestle Malaysia and Super Group are both categorised as FMCG companies, there are differences in their business models.

Nestle Malaysia, which is based in Malaysia, has a wide product portfolio that includes milk, coffee, cereals, and more. Super Group, meanwhile, is based in Singapore and focuses on instant coffee products and also concocts the ingredients that go into the manufacture of other instant beverages.

Moreover, Super Group’s business is more export-driven whereas Nestle Malaysia is more domestic-focused.

Business growth

The following table shows the changes in both companies’ revenue and net profit from 2011 to 2015.

Source: S&P Global Market Intelligence

While Super Group has the slightly better top-line growth, its bottom-line picture isn’t as good as Nestle Malaysia’s.

Net profit margin history

Next up, we have a history of the net profit margins for Nestle Malaysia and Super Group from 2011 to 2015:

Source: S&P Global Market Intelligence

We can see that Super Group has had higher net profit margins than Nestle Malaysia at times. But, Super Group’s margins have been a lot more volatile than Nestle Malaysia’s and have in fact, been falling over the past two years.

Return on equity

The ROE metric measures a company’s ability to generate a profit with the shareholders’ capital it has. In general, the higher the ROE, the better it could be. That said, the use of high debt can juice up a company’s ROE, but debt introduces financial risk. So, that’s something to keep in mind too.

Here are the two companies’ ROEs from 2011 to 2015:

Source: S&P Global Market Intelligence

We can see that Nestle Malaysia has consistently maintained a ROE of around 70% to 80%. Super Group, on the other hand, has seen its ROE fall drastically over the past few years.

A Foolish conclusion

This quick overview we have on Nestle Malaysia and Super represent a good starting point for investors to appreciate the differences between the two companies. By putting the two companies side by side, investors can ask better questions, thus allowing them to better understand the underlying businesses of both.

For example, investors who dig in further would realise that Super Group’s profits have been impacted partly by currency issues – because the company sources revenue from many parts of Southeast Asia, the depreciation of regional currencies against the Singapore dollar in recent years has had a negative impact on its business.

This is something that’s less of a problem with Nestle Malaysia – the company sells its products mainly in Malaysia and reports in the ringgit.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Nestle Malaysia and Super Group. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.