Stock Name: OLDTOWN
Company Name: OLDTOWN BERHAD
Company Name: OLDTOWN BERHAD
| Research House: KENANGA | Price Call: BUY | Target Price: 1.58 |
We attended Oldtown's company briefing yesterday, where the turnoutwas extremely encouraging. We reckon that the number of participants wasactually more than double that compared to the previous briefing we attended.While there was no breaking information as it was more of an introductorysession to the company's business and plans, we nonetheless went away feelingoptimistic as we gather that management is still confident and steadfast in itseffort to grow the company amidst the promising outlook for both the caf'' andbeverage distribution businesses. We note that institutional shareholding inthe stock has also increased lately, which supports our conviction on thecompany's bright prospects. Reflecting its continuing positive outlook, we aremaintaining our Oldtown's FY12 and FY13Enet profit of RM43.9m and RM51.7m, which will see the earnings growing 9.3% and17.7%, respectively. Our OUTPERFORM call on Oldtown is reaffirmed with a TP ofRM1.58, based on 12x PER over its FY12 EPS of 13.2sen. Continue to buy thestock at market, for it still offers potential strong total returns of 27.5% atthe current price (capital upside of 22.4% to our TP plus gross dividend yieldof 5.1%).
Rising interest inthe stock. We came away from the briefing feeling positive as it is evident that investors' interests are growingstronger, which reinforces our conviction buy call on the stock which weinitiated with OUTPERFORM and TP of RM1.46. Meanwhile, we also observed that the foreign and local funds have startedto increase their stakes in the stock recently, and have accumulated 18.6%stake as at 23 Feb 2012. We also understand that the promoters (management andmajor shareholders) will no longer sell their shares in the open market andthis could be a positive indication of the company's future earningsgrowth.
Comfortable with ourearnings forecasts. Currently, wehave the highest forecast for FY12E net profits of RM43.9m as compared to consensusforecast of RM41.7m. We believe our estimate is achievable at this juncture askey drivers are going strong. Main drivers are the strong double digits growthrate in the FMCG segment and a moderate growth in the caf'' chains. The stronggrowth of FMCG is expected to be boosted by the continuation of likely risingmarket shares seen across the three regions in 2012 (2011 market share gains-Malaysia: +1.2ppt; Hong Kong: +0.7ppt; Singapore: +2.7ppt), as well as, penetration into untapped marketssuch as a few provinces in China, South Korea and Vietnam. Meanwhile, themanagement's vision of opening more caf'' outlets domestically and regionallyshould be more than adequate to sustain the moderate growth rate in the segmentthat we are conservatively forecasting for now.
We are maintainingour bullish view on the company. If the economic condition normalizes withChina continuing its growth trajectory, we believe there could be more upsidesto our FY13E estimates. Currently, our FY13E net profit of RM51.7m, assumes a very conservative18.6% growth in FMCG. Our sensitivity analysis indicates that if FMCG growth hits 40% levels, it will increase our FY13E earnings by 8% to RM55.7m(see below for details), which implies 7.6x Fwd PER. This strong growth of FMCGis expected to be boosted by the continuation of likely rising market sharesseen across the three regions, as well as, penetration into untapped marketssuch as a few provinces in China, South Korea and Vietnam
Source: Kenanga
This is a better-quality article as they all are. I am waiting to read even more about this topic. I make fun of been wonder wide this an eye to some beat now. Thanks for sharing.
ReplyDelete