It's somewhat of a mystery why this "other income" is as high as it's been in 2019/20. This is what Ultrajaya writes in their annual report about the "Others" post within "other income":
“When finished goods and raw materials are being damaged or broken or expired they will be directly written off during the period. Total loss of finished goods and raw materials destruction for the year ended 31 December 2020 and 2019 amounted to Rp 26,958 and Rp 28,480, respectively, and were taken up under “Others” in the “Other Income - net” account in the consolidated statement of profit or loss and other comprehensive income”
But this item should be negative, so there must be an offsetting item as well. There is no disclosure about that this offsetting item is, so I have been conservative and assumed a significant drop in other income.
You seem to like milk a lot....might want to check out Greatview Aseptic Packaging: milk packaging in China, a cheaper version of tetra pak. Trading around a projected PE of 12. Jardine and Mengniu own some. Net cash, high dividend, low (medium?) growth.
If we expect to see inflation 'spikes' over the next decade, the main question would be how soon they are able to pass on raw material costs every time this happens.
I don't know the industry: the competition & barriers to entry.
And I was keen to dig deeper into Ultrajaya after I saw that they had repurchased 10% of their shares.
Thanks for the idea regarding Greatview Aseptic Packaging. I actually reached out to GSP and have read a bit about the company. Very generous dividend pay-out policy but I'm not sure about the "moat" and whether there are any barriers to entry. The stock looks very inexpensive indeed. It's on my to-do list, so I might dig deeper at some point.
What’s your thinking behind as to why Indonesia’s milk consumption will grow? Don’t they use coconut milk in their cooking? Is it just population growth
Well, the strongest argument for higher milk consumption is that Malaysia already consumes almost 60 litres per capita per year. Malaysia is culturally and ethnically quite similar to Indonesia.
I get the feeling that in Asia, milk is more given to children to improve their nutrition (including calcium). Much more so than in Europe, where milk is consumed with corn flakes, in cooking sauces, etc.
Population growth of 1.1% per year also helps, obviously.
Ok, so the main reason why I haven't invested in Ultrajaya yet is that I just set up a new brokerage account here in Singapore and moved money over. It will be finalised tomorrow.
But generally speaking, I prefer to invest in older ideas. There's always a honeymoon period when I discover something new. After 3-4 months, I tend to see my ideas in a different light.
Luckily, I haven't had the problem yet of share price reacting to my write-ups. So I don't feel too stressed about writing a deep-dive and then wait to invest. But be aware that I do trade past ideas actively. More on this coming later this week.
As far Ultrajaya's capital allocation, I totally agree. The share repurchase probably made sense. But the timing on the MTN was poor and completely unnecessary given that they had plenty of cash + government on the balance sheet. Locking in high rates for three years. So I agree with you. They're probably too conservative and not as savvy when it comes to capital allocation.
Do you have any idea what other income in the income statements is? It's fairly significant - 97.4 billion Rupiah in 2020.
Hi Edward!
It's somewhat of a mystery why this "other income" is as high as it's been in 2019/20. This is what Ultrajaya writes in their annual report about the "Others" post within "other income":
“When finished goods and raw materials are being damaged or broken or expired they will be directly written off during the period. Total loss of finished goods and raw materials destruction for the year ended 31 December 2020 and 2019 amounted to Rp 26,958 and Rp 28,480, respectively, and were taken up under “Others” in the “Other Income - net” account in the consolidated statement of profit or loss and other comprehensive income”
But this item should be negative, so there must be an offsetting item as well. There is no disclosure about that this offsetting item is, so I have been conservative and assumed a significant drop in other income.
You seem to like milk a lot....might want to check out Greatview Aseptic Packaging: milk packaging in China, a cheaper version of tetra pak. Trading around a projected PE of 12. Jardine and Mengniu own some. Net cash, high dividend, low (medium?) growth.
Idea is from: http://www.globalstockpicking.com/category/greatview-aseptic/
Raw materials is 90% of COGS, so they are susceptible to inflation:
https://greatviewpack.com/site/assets/files/1405/e00468_3.pdf
If we expect to see inflation 'spikes' over the next decade, the main question would be how soon they are able to pass on raw material costs every time this happens.
I don't know the industry: the competition & barriers to entry.
Hi Roger, yes I had written about the Asian dairy industry in the past. https://www.asiancenturystocks.com/p/mapping-the-asian-dairy-industry
And I was keen to dig deeper into Ultrajaya after I saw that they had repurchased 10% of their shares.
Thanks for the idea regarding Greatview Aseptic Packaging. I actually reached out to GSP and have read a bit about the company. Very generous dividend pay-out policy but I'm not sure about the "moat" and whether there are any barriers to entry. The stock looks very inexpensive indeed. It's on my to-do list, so I might dig deeper at some point.
What’s your thinking behind as to why Indonesia’s milk consumption will grow? Don’t they use coconut milk in their cooking? Is it just population growth
Well, the strongest argument for higher milk consumption is that Malaysia already consumes almost 60 litres per capita per year. Malaysia is culturally and ethnically quite similar to Indonesia.
I get the feeling that in Asia, milk is more given to children to improve their nutrition (including calcium). Much more so than in Europe, where milk is consumed with corn flakes, in cooking sauces, etc.
Population growth of 1.1% per year also helps, obviously.
A potential hurdle is lactose intolerance. But again, if Malaysians are able to consume close to 60 litres per year, why can't Indonesia. https://www.semanticscholar.org/paper/Hypolactasia-%26-lactose-intolerance-among-three-in-Asmawi-Seppo/ec8ae4c3efed408b8f8682bdf9282563d627bc22/figure/2
Decent secular growth of around 10% per year suggests that the liquid milk consumption has not reached maturity yet.
Ok, so the main reason why I haven't invested in Ultrajaya yet is that I just set up a new brokerage account here in Singapore and moved money over. It will be finalised tomorrow.
But generally speaking, I prefer to invest in older ideas. There's always a honeymoon period when I discover something new. After 3-4 months, I tend to see my ideas in a different light.
Luckily, I haven't had the problem yet of share price reacting to my write-ups. So I don't feel too stressed about writing a deep-dive and then wait to invest. But be aware that I do trade past ideas actively. More on this coming later this week.
As far Ultrajaya's capital allocation, I totally agree. The share repurchase probably made sense. But the timing on the MTN was poor and completely unnecessary given that they had plenty of cash + government on the balance sheet. Locking in high rates for three years. So I agree with you. They're probably too conservative and not as savvy when it comes to capital allocation.