We still think Oldtown remains a good bet among consumer stocks,
riding mainly on its two segments – the strong growth of its fast moving
consumer goods (“FMCG”) in untapped markets, as well as, continuous opening of
café outlets in the region. Increasing shareholding activities, especially
institutional ones, reflects growing investors’ confidence given positive
prospects and management’s commitment. Earnings forecast maintained. We continue
to be bullish and maintain OUTPERFORM with higher Target Price of RM1.73
(RM1.58 previously). Valuations are based on unchanged 12x Fwd PER and average
FY12-13E EPS of 14.4sen as we partly
roll over to FY13E. Together
with its decent FY12-13E net dividend
yield of 4.6%-5.4%, the stock offers total returns of
10%.
Coffee to go! Along the transformation journey towards a
developed and high-income nation, Oldtown believes Malaysians increasing living
standards of burgeoning white collared professionals will see rise of ‘on the
go’ kiosk concepts; hence the new ‘Coffee to go!’ concept. Management is
targeting to set up two kiosks in KLCC and Midvalley Megamall in Sep-Oct 2012
based on initial investment of RM200k-RM300k per store. The company has yet to confirm
full or partial ownership of the kiosks. Breakeven period ranges between 12-24
months but contributions will be minimal at this juncture.
Café on track. In
Singapore, the new concept stores with more pleasant and modern fittings have
resulted in sales doubling. So management is bringing this new concept stores
to Malaysia. Out of 7 outlets opened in 2Q12, 3 of these are the new concept
stores. Furthermore, management also highlighted that its China’s centralize
kitchen is on track, commencing in 6-9 months to embark on greater café
expansion in the tier one cities in China. Their target domestic and regional
café outlets growth will sustain our estimated FY12-13E segment growth of
11%-12%.
Maintain forecasts.
We remain positive on the company given its two key drivers; 1) strong FMCG
growth, boosted by growing regional market share, including untapped markets in
China, South Korea and Vietnam; 2) its vision of opening more outlets in
Malaysia, Singapore, Indonesia and
China. As such, we are maintaining our FY12-13E earnings growth of 9%-18%.
Reiterate OUTPERFORM with higher Target Price of RM1.73 (RM1.58
previously). Valuations are based on unchanged 12x Fwd PER and average FY12-13E
EPS of 14.4sen as we partly
roll over to
FY13E. Our applied Fwd PER is
based on industry average. Together with its decent net dividend yield of
4%-5%, the stock offers total returns of 10% to our TP of RM1.65.
Source: Kenanga
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