Oldtown’s FY11 revenue was in line with our estimate, making up 97.2% of our projection, while core
net profit was within our
projection due to gains on disposals and
better profit margins in 4Q11. We continue to like Oldtown’s attractive valuation and bright prospects
moving forward. We are maintaining our BUY recommendation on the stock, with an
unchanged fair value of RM1.55, pegged to 13.0x FY12 EPS.
In line.
Oldtown’s revenue of RM285.5m was in line with our estimates, accounting for 97.2%
of our numbers while the reported net
profit of RM40.2m beat our forecast by 13.9% due to gains on various disposals
amounting to RM9.2m. Stripping out the gains, core net profit of RM30.1m was
within our estimate, accounting for 102.6% of our numbers. The group’s EBITDA
came in at RM68.1m versus our estimate of RM63.3m while core net profit fell
6.0% y-o-y due to higher administrative and general expenses associated with
the group’s expansion plans and the 6-month recognition of profit from the
subsidiaries it acquired after its listing, instead of 12 months (had the
acquisition been completed on 1 Jan 2011, core net profit would have been
RM34.2m). Revenue growth of its FMCG division outpaced its F&B division as
FMCG revenue accounted for some 38% of total revenue compared to 35% in the
previous year.
Maintaining forward
earnings. We are maintaining our
profit growth forecasts for FY12 and FY13 given that the group would be able to
recognize full year profits from the subsidiaries it acquired after its
listing. We believe its FMCG margins may further improve as prices of
food commodities such as milk powder and Arabica coffee were stable in
1Q12 but we think that margins at its F&B business will continue to come
under pressure as the company is unable
to pass on its higher costs to customers - or risk losing market
share to its competitors - and is facing escalating rental costs. Also, we gather that
there may be a one-off impairment charge of some RM2-3m in FY12 relating to its
acquisitions after the group went public.
Upside potential to
our view. i)
Stronger-than-expected volume growth
in its FMCG business in the
overseas markets, ii) prices of food commodities are sustained at current levels,
iii) faster-than-expected rollout of
its outlets locally and overseas, and iv) obtaining ‘halal’ certification from
JAKIM sooner than expected.
Maintain BUY. We
continue to like Oldtown’s exposure to the defensive F&B subsector and its
attractive valuation at 10.5x FY12 EPS, plus decent top- and bottom-line growth
moving forward. This will be further enhanced by its regional expansion plans. The company has
declared a second interim dividend of 4 sen, bringing the total dividend to 6.5
sen for FY11. We maintain our BUY call, with an unchanged FV of RM1.55.
Source: OSK188
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