Oldtown's 4QFY16 net profit jumped 80.4% Y.oY to Rm18.4 mln from RM10.2mln in the previous corresponding period, mainly due to lower operating expenses, particularly selling and distribution cost that boosted its EBITDA margin to 24.0% (from 19.4% in 4QFY15), as well as the 7.6% Y.o.Y increase in revenue to RM104.5 mln. BUY for the TP RM1.95.

For the full year, cumulative net prodit imporved 10.1% Y.o.Y to Rm52.3 mln from RM47.5 mln in the previous year. Revenue for the year, however, fell slightly by 1.1% Y.o.Y to RM393.4 mln from RM397.7 mln. The reported earnings were above our expectations, accounting for about 123.1% of our full year estimated net profit of RM 42.5 mln, while the reported revenue was within our expectations, accounting to 99.6% of our FY16 revenue forecast of RM394.8 mln.

Segmentally, the operation of café chain stores' pretax profit for 4QFY16 shrank 19.2% Y.o.Y to RM4.0 mln, attributed to a RM3.0 mln goodwill impairment. Meanwhile, the manufacturing of beverages division's pretax profit jumped 85.5% Y.o.Y to RM16.9 mln, on the back of stronger sales in both the domestic and export markets.

Contributions from the overseas market amounted to 37.5%, or RM39.2 mln of Oldtown’s 4QFY16 sales, higher than the 30.0%, or RM29.2 mln recorded in 4QFY15. The higher contributions from the export market were in line with the management’s efforts to grow its export revenue, which will also be its goal for the foreseeable future. Meanwhile, the company’s net cash position of RM153.5 mln will provide sufficient liquidity for its expansion plans without relying on external funds, should the opportunity arises. The total dividends declared by Oldtown were 9.0 sen per share in FY16.

Source: M+ Online Research - 30 May 2016