Journey to Wealth
Oldtown - OUTPERFORM - 28 May 2012
Period 1Q12
Actual vs. Expectations
The 1Q12 net profit (NP) of RM11.4m was in line with the street's estimate and our forecast of RM41.3m (28%) and RM43.9m (26%) respectively.
Dividends No dividend was announced during the quarter
Key Result Highlights
As the stock was listed in July 2011, yearly comparison is not available.
QoQ, revenue was down by 4% due to an almost flat growth of 0.3% QoQ for beverage manufacturing, which was not enough to cushion the decline in the caf'' chain segment (-6% QoQ). The weaker sales were due to less new franchised outlets opened, meaning fewer furniture and utensils sales compared to 4Q11.
However, PBT improved 6% QoQ due to lower advertisement and promotion costs (selling and distribution expenses: -47% QoQ) and lower amortization of intangible asset in the quarter. \
NP declined 2% QoQ due to a more normalized tax bracket of 26% (vs. just 21% in 4Q11).
Outlook We remain positive on the company given its two key drivers; 1) the strong growth of its fast moving consumer goods ('FMCG') which is expected to be boosted by growing regional market share, including untapped markets in China, South Korea and Vietnam and; 2) its vision of opening more outlets in Malaysia, Singapore, Indonesia and China.
As of March 2012, the company has 201 caf'' outlets as compared to 196 in Dec 2011. Given the current rate of store opening, we believe our conservative target of 25 new outlets this year is viable to grow the earnings further by opening new stores in the 2H12 to capture the festival season.
Change to Forecasts
Maintain FY12-13E net profit of RM43.9mRM51.7m.
Rating MAINTAIN OUTPERFORM
We like the company for its strong FY12-13E earnings growth of 9%-18%. Together with its decent net dividend yield of 5%, the stock offers total returns of 15% to our TP of RM1.58.
Valuation No changes to TP of RM1.58, based on 12x PER over its FY12 EPS of 13.2sen.
Risks Global economic uncertainty may impact consumers spending, which will consequently soften the company's earnings.
Source: Kenanga
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
