Oldtown - Listing Of New Shares On 21st Dec

News    Oldtown announced that it would be listing its recent issue of 33.0m new shares today. To recap, the shares were issued at RM1.95 each and represented 10% of its existing issued share capital of 330m shares.

Comments     The exercise raised RM64.4m in cash for Oldtown, doubling its current net cash position to RM128.7m.

This will allow the company to partially fund the business expansion of both its café and beverage manufacturing businesses both domestically and internationally.

The ROE and EPS will see dilutions of 2.7ppt and 9.4% respectively due to the bigger share base despite a higher interest income assumed from the proceeds.

Outlook     Oldtown’s prospects remain positive with two key drivers, i.e. 1) the strong growth of its FMCG segment, which is expected to be boosted by its growing regional market share, including that of untapped markets in China, South Korea and Vietnam and 2) the likely opening of more outlets in Malaysia, Singapore, Indonesia and China.

Forecast     Our earnings estimates are maintained. H

owever, we have aligned our financial year-end to the company’s new financial year-end, i.e. from 31 Dec to 31 Mar, resulting in our adjusted earnings estimates of RM52.8m and RM59.8m for FY13-14E, respectively.

Rating     Maintained OUTPERFORM

Valuation      Based on an unchanged targeted PER of 14.5x (at a +1.5SD of the average PER), our fair value is maintained at RM2.40 on the adjusted FY14 EPS of 16.5 sen despite the dilution noted above as we have rolled forward our valuation to FY14.

Risks     Global economic uncertainty may impact consumers spending leading to a drop in demands and a slowdown in its outlet expansions.

Source: Kenanga