Comments

• Privatization: Shareholders of Oldtown had received a voluntary offer to be taken private by Jacobs Douwe Egberts (JDE) for RM3.18/share. As of 13 March 2018, JDE announced that they have accumulated over 90% of OldTown shares. As such, JDE will formally seek to withdraw OldTown’s listing status from the Kuala Lumpur Stock Exchange. JDE currently holds 90.32% of Oldtown’s shares.

• Outlook: We expect Oldtown to continue to make headway in Greater China, particularly through its online sales platform to exploit the region’s enormous growth potential and growing middle class consumers among the urban population. However, stronger ringgit strength going forward should somewhat dampen export growth in ringgit terms (HLIB forecast for 2018 RM/USD: 4.00-4.20).

Risks

• Relatively elastic demand.

• Rising raw material prices.

Forecasts

• Unchanged.

Rating

CEASE COVERAGE

• The offer price of RM3.18/share is 18.6x of our estimated FY19 EPS and thus represents good value for investors. The offer price is 9% above our estimated fair value of RM2.91. As such, we opine that the offer is beneficial for minorities.

Valuation

• Our previous TP of RM3.18 was based on JDE’s takeover offer price. As JDE currently hold over 90% of OldTown, JDE will take steps to withdraw Oldtown’s listing status. As such, we cease coverage on the counter.

Source: Hong Leong Investment Bank Research - 14 Mar 2018