OLDTOWN (5201) : OldTown sustains net profit growth for F&B despite hiccups
OldTown Bhd
(Dec 5, RM1.52)
Maintain “buy” with a target price (TP) of RM2. There was greater clarity on the group’s recent first-half financial year 2015 (1HFY15) results at OldTown Bhd analyst briefing and with all things constant, we would expect an improved 2HFY15. Some of the positives are for its food and beverage (F&B) operations. OldTown sustained net profit growth despite the closure of stores for renovation and higher labour costs while for its fast-moving consumer goods (FMCG) operations, domestic sales have gained market share despite very stiff competition while export sales should resume after some hiccups in 1HFY15.
What was also encouraging is that OldTown’s revamp of its domestic distributorship has resulted in a 140% jump in distribution points while new regional distributors have been appointed to spearhead growth in markets such as Indonesia. The group’s domestic market share in the white coffee space stays dominant and has improved from 33% to 35% end-September 2014 and to 36% end-October 2014. Moreover, the growth in white coffee industry sales remains robust at 12% year-on-year (y-o-y) in Malaysia, 21% y-o-y in Hong Kong and a more moderate 7% y-o-y in Singapore.
Into 2HFY15 , we expect F&B sales to be seasonally stronger, especially in the absence of store renovations, but margins are likely to come in lower half-on-half (h-o-h) due to higher promotional expenses, particularly for its White Curry Series. On the FMCG side, export sales should also pick up h-o-h after several hiccups in 1HFY15, while advertising and promotion expenditure is expected to come in lower h-o-h. Cost savings should feature over the longer term once its new automated packaging line comes on stream in July 2015, which should contribute to savings on labour and packaging.
Our “buy” call maintained. Our TP of RM2 tags on an FY15 price-earnings ratio of 18 times. — Maybank Investment Bank Research, Dec 5
http://www.theedgemarkets.com
OldTown Bhd
(Dec 5, RM1.52)
Maintain “buy” with a target price (TP) of RM2. There was greater clarity on the group’s recent first-half financial year 2015 (1HFY15) results at OldTown Bhd analyst briefing and with all things constant, we would expect an improved 2HFY15. Some of the positives are for its food and beverage (F&B) operations. OldTown sustained net profit growth despite the closure of stores for renovation and higher labour costs while for its fast-moving consumer goods (FMCG) operations, domestic sales have gained market share despite very stiff competition while export sales should resume after some hiccups in 1HFY15.
What was also encouraging is that OldTown’s revamp of its domestic distributorship has resulted in a 140% jump in distribution points while new regional distributors have been appointed to spearhead growth in markets such as Indonesia. The group’s domestic market share in the white coffee space stays dominant and has improved from 33% to 35% end-September 2014 and to 36% end-October 2014. Moreover, the growth in white coffee industry sales remains robust at 12% year-on-year (y-o-y) in Malaysia, 21% y-o-y in Hong Kong and a more moderate 7% y-o-y in Singapore.
Into 2HFY15 , we expect F&B sales to be seasonally stronger, especially in the absence of store renovations, but margins are likely to come in lower half-on-half (h-o-h) due to higher promotional expenses, particularly for its White Curry Series. On the FMCG side, export sales should also pick up h-o-h after several hiccups in 1HFY15, while advertising and promotion expenditure is expected to come in lower h-o-h. Cost savings should feature over the longer term once its new automated packaging line comes on stream in July 2015, which should contribute to savings on labour and packaging.
Our “buy” call maintained. Our TP of RM2 tags on an FY15 price-earnings ratio of 18 times. — Maybank Investment Bank Research, Dec 5
http://www.theedgemarkets.com
