Today, I am going to walk you through another unpopular stock in KL Stock Exchange (KLSE), Ajinomoto Malaysia (or AJI). This company is well-known globally as a manufacturer of MSG. AJI focuses on markets in Malaysia (57%), Middle East (22%), and ASEAN countries (20%).
Frankly speaking, I seldom use MSG at home, as there are a lot of unproven negative perceptions on the use of MSG spreading around. Nevertheless, when I look at the annual sales figure of AJI, it seriously grasps my attention. See below:
Figure 1: Historical sales of Ajinomoto Malaysia
AJI sales has been growing consistently from the past 16 years. Impressive right? The revenue growth is even more explosive since 2023, as AJI has shifted its manufacturing base from Kuchai Lama to Bandar Enstek which enables the company to expand its manufacturing capacity. Figures 2 and 3 show the sales breakdown of the consumer and industrial business segments of AJI, respectively.
Figure 2: AJI revenue from consumer segment
Figure 3: AJI revenue from industrial segment
Seemingly, consumer segment plays a more crucial role in terms of revenue contribution of AJI, and it experiences a more significant growth (especially after FY2022) as compared to the industrial segment. There is a slight dip in sales from the consumer segment in 2021, which could be due to the lock-down during Covid period. Sometimes, I wonder that since many peoples do not consume MSG at home (or if they do, they will just use MSG secretly, without telling other people openly), how AJI is able to grow its business?? Well, my friend told me that most restaurants would still use it. Indeed, a few weeks ago, I saw a restaurant boss just bought a big pack of AJINOMOTO from 99Speedmart.
Note: There are various MSG brands in market now. For example, AJI-Noriki, AJI-Nazri, and other smaller brands. They could impose threat on AJINOMOTO as their selling prices are cheaper than AJINOMOTO. However, according to my Malay friend, a food stall owner, he still prefers AJINOMOTO because he needs a smaller amount of it compared to other brands to achieve a similar taste for his soup. This could be the advantage of AJINOMOTO.
Operating profit
Next, let us get into the historical data of AJI’s operating profit (or Earning Before Interest and Tax, EBIT). This number is not directly appearing in the annual report; however, you can look for it from the final quarter report (Q4) of each financial year (FY).
Figure 4: AJI historical operating profit (or EBIT)
Well, it is not trending in tandem with its revenue, isn’t it? This is particularly true during years 2021-2023. Management has attributed the drop in operating profits to several reasons:
FY2021 (closing in March 2021): The decrease in profit before tax was mainly due to lower revenue, higher advertising expenses, reduction in distribution from investment securities and interest income.
FY2022 (closing in March 2023): The decrease in profit before tax was mainly due to the hike in raw material prices and fuel costs, higher freight and transportation costs, increase in staff costs, depreciation, computer hardware and software maintenance and other operating expenses.
FY2023 (closing in March 2023): Increase of raw material prices, hardware and software maintenance costs and transitional costs from factory relocation to the Company’s new factory in Bandar Enstek.
The raw materials of AJINOMOTO are mainly tapioca, corn and sugarcane. As seen below, indeed, the corn and sugar prices stayed at high level within 2022-2024. Nevertheless, these prices have dropped since 2024.
Figure 5: Historical sugar price (from: https://tradingeconomics.com/commodity/sugar)
Figure 6: Historical corn price (https://tradingeconomics.com/commodity/corn)
Core profit
The core profit of AJI is shown below.
Figure 7: Core profit of AJI
Please take note the following calculation method of core profit, where I have adjusted the reported profit attributed to shareholders (i.e. P) accordingly, by:
(1) Adding/Subtracting P with the unrealized forex loss/gain.
(2) Deducting P with the one-time gain (disposal of assets) of RM394 million in FY2024 (Kuchai Lama land) and RM145 million in FY2017.
(3) Deducting P with the one-time tax incentive of RM11.6 million in FY2023.
(4) Core profit calculation of FY2025 needs more explanation. In Q4-FY 2025, AJI has declared a loss due to big spending on advertisement. See Figure 8. The management did not reveal the exact cost of this spending. However, I noticed that its net profit margin (NP Margin from Q1-Q3-FY2025) is normally around 10%. Therefore, I assume that Q4-FY2025 would have a profit of RM149.7 million (i.e. revenue in Q4-FY2025) x 10% = RM14.9 million. Adding this RM14.9 million with the net profits from Q1-Q3-FY2025 would give me around RM 72 million of net profit. Adding this RM 72 million with the unrealized forex loss of RM 1.2 million would give around RM 73 million of core profit, the highest since 2009.
Figure 8: Quarter profit in FY2025 of AJI. (Taken from https://klse.i3investor.com/web/stock/financial-quarter/2658)
Any other catalysts for AJI?
One may forecast the future manufacturing activity by looking at the value of raw materials in the inventory. From the raw material value obtained from the inventory section outlined in the annual report of AJI, I can see that the amount of the raw material purchased in FY2025 is the highest since FY2010. This could indicate the Management is purchasing more raw materials to boost up its future manufacturing activities, which is a good sign.
Figure 9: Raw material values (in RM) of AJI
The sales recorded at different markets are shown in Figure 10. Seemingly, middle east market is experiencing the most rapid growth (since FY2023) as compared to the remaining two markets in Malaysia and ASEAN. From the explosive growth trend of consumer segment (see Figure 2), I guess the middle east market focuses more on consumer-based AJI products. Therefore, the middle east market could be the potential market for the next phase of growth of AJI. After all, the products of AJI are halal certified (I heard from my friend saying that AJINOMOTO Malaysia is the first company in Malaysia that was granted with Jakim Halal certification à Need to double check).
(a)
(b)
(c)
Figure 10: Revenues contributed by (a) Malaysia; (b) Middle East and (c) ASEAN countries.
Worth for investment at current price?
It is time for valuation.
In fact, it is a bit tricky to determine the fair core PER value of AJI as its profit swing is quite wild since FY2021. If we get the fair core PER directly based on the most recent N-years core PER values (say N = 4 years or 5 years), one may end up with an exceptionally high PER, which is meaningless. For example, in FY2024, the core PER is ~180, as the core profit reported is low (huge chunk of reported profit is coming from asset sales in Kuchai Lama, which is one-off and non-recurring).
To resolve this issue, I have decided to choose the core PER values from those years where both the “profit attributed to equity holder” and “core profit” undergo year-on-year growth. The years that satisfy my requirement are: 2014-2016, 2020. There are a few years before 2014 that satisfy my requirement; however, I ignored them as I worry that the core PER data could be too old to yield any meaningful impact on the valuation to date. The averaged or median value of the core PER values of the chosen years are then determined. Finally, the fair PER value of AJI is the calculated based on the minimum between the averaged and the median values (for conservative purpose), i.e. fair PER ~ 12.84 (averaged value is taken).
Figure 11: Trend of core PER of AJI
Yes, we have determined the fair core PER of AJI.
The next question is: What is the current core PER of AJI?
To start the calculation, the rolling four quarters Earnings per Share (EPS) is firstly computed by adding the profits of the most recent 4 quarters as shown in the green box (Figure 12). Note that the negative profit RM -6902000 is normalized to RM 14979000 (i.e. 10% of quarter revenue to reflect the one-off advertisement cost, see explanation earlier). The rolling four quarters net profit is ~ RM77.6 million. Divide the net profit by the number of shares of 60.8 million, the EPS is ~ RM 1.276. Considering the closing price on 22 Dec 2025 of RM 13.64, the current PER is 13.64/1.27 = 10.69.
Figure 12: Quarter result of AJI (https://klse.i3investor.com/web/stock/financial-quarter/2658)
Is the current AJI share price of RM 13.64 attractive?
For investment, we are looking for Margin of Safety (MOS), an idea advocated by Warren Buffet. As value investor, we look for a safe investment to minimize risk, as always. Typically, MOS of 20% or more is considered attractive for me. For AJI traded at current level, MOS = (fair core PER – current core PER)/current core PER * 100% = (12.84-10.69)/10.69 = 20%, which is quite attractive for me personally. If AJI could grow further its EPS, the MOS is even higher, and it is definitely a good investment out there for all value investors.
Note: MYR is strengthening against USD in Q3-FY2026. Therefore, AJI could book an unrealized forex loss in the upcoming quarter (vs RM 3.6 million of unrealized forex gain in Q3-FY2025). This may cause the reported profit in the upcoming quarter of Q3-FY2026 to be lower than that of Q3-FY2025.
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