Oldtown's FY11 revenue was in line with our estimate,  making up 97.2% of our projection, while corenet profit  was within ourprojection  due to gains on disposals andbetter profit margins in 4Q11. We continue to like Oldtown's  attractive valuation and bright prospectsmoving forward. We are maintaining our BUY recommendation on the stock, with anunchanged fair value of RM1.55, pegged to 13.0x FY12 EPS.

In line.Oldtown's revenue of RM285.5m was in line with our estimates, accounting for 97.2%of our numbers while the  reported netprofit of RM40.2m beat our forecast by 13.9% due to gains on various disposalsamounting to RM9.2m. Stripping out the gains, core net profit of RM30.1m waswithin our estimate, accounting for 102.6% of our numbers. The group's EBITDAcame in at RM68.1m versus our estimate of RM63.3m while core net profit fell6.0% y-o-y due to higher administrative and general expenses associated withthe group's expansion plans and the 6-month recognition of profit from thesubsidiaries it acquired after its listing, instead of 12 months (had theacquisition been completed on 1 Jan 2011, core net profit would have beenRM34.2m). Revenue growth of its FMCG division outpaced its F&B division asFMCG revenue accounted for some 38% of total revenue compared to 35% in theprevious year.

Maintaining forwardearnings.  We are maintaining ourprofit growth forecasts for FY12 and FY13 given that the group would be able torecognize full year profits from the subsidiaries it acquired after itslisting. We believe its FMCG margins may further improve  as prices of food commodities such as milk powder and Arabica coffee were stable in1Q12 but we think that margins at its F&B business will continue to comeunder pressure as the company is  unableto pass on  its higher  costs to customers - or risk losing marketshare to its  competitors  - and is facing  escalating rental costs. Also, we gather thatthere may be a one-off impairment charge of some RM2-3m in FY12 relating to itsacquisitions after the group went public.

Upside  potential to our view.  i)Stronger-than-expected volume growth in  its FMCG business in theoverseas markets, ii) prices of food commodities are sustained at current levels,iii) faster-than-expected  rollout ofits  outlets  locally and overseas, and  iv) obtaining 'halal' certification fromJAKIM sooner than expected.

Maintain BUY. Wecontinue to like Oldtown's exposure to the defensive F&B subsector and itsattractive valuation at 10.5x FY12 EPS, plus decent top- and bottom-line growthmoving forward. This will be further enhanced by its  regional expansion plans. The company hasdeclared a second interim dividend of 4 sen, bringing the total dividend to 6.5sen for FY11. We maintain our BUY call, with an unchanged FV of RM1.55.

Source: OSK188