Period     3Q12/9M12

Actual vs. Expectations      The 9M12 net profit (NP) of RM35.0m was slightly above the street's estimate and our forecast of RM44.0m, making up 79.5% of both numbers.

Dividends   An interim single-tier 6 sen dividend has been declared during the quarter, which was on the dot with our estimate, translating into a dividend yield of 3.2%.

Key Result Highlights        QoQ, the 3Q12 revenue decreased marginally by 2.7% due to a 3.8% decrease in the operation of caf'' chain ('OCC') due to the fasting month during the quarter. In line with the revenue trend, the PBT was down by 8.7% QoQ due mainly to the decline in OCC by 12.5% although the impact was cushioned by the 1.4% increase in the PBT of the manufacturing of beverage (MB) segment. 

 YoY, the 3Q12 revenue improved 13.8% on the back of better sales from OCC (+6.3%) and MB (+26.4%). Meanwhile, the PBT and NP were 20.0% and 26.9% higher on the back of better sales from both segments as well as a higher PBT margin contribution (+2.1ppt to 16.8%) from OCC that offset the lower margin (-3.8ppt to 19.7) in MB. 

 YTD, the revenue and PBT YoY jumped by 21.6% and 26.1% respectively attributed to the better OCC and MB sales (+19.8% and +24.4%, respectively) as well as  the acquisition of new subsidiaries in May 2011. Based on the proforma numbers given by the company, which reflected the full year contribution of the new subsidiaries  in both 9M11 and 9M12, we estimate that the revenue and PBT of the group without the new acquisitions contribution still rose by a healthy 13.5% and 12.6% YoY respectively. 

Outlook   We remain positive on the company given 1) the strong growth of its fast-moving consumer goods (FMCG) segment, which is expected to be boosted by its growing regional market share, including that of the untapped markets in China, South Korea and Vietnam; and 2) its vision of opening more outlets in Malaysia, Singapore, Indonesia and China. As of Sept 2012, the company has 210 caf'' outlets (vs. 196 in Dec 2011), of which 191 are located in Malaysia, 9 in Singapore, 7 in Indonesia and 3 in China. We believe the company is still targeting to open another 12 new stores in 4Q12 to capture the upcoming festive season sales.

Change to Forecasts      We are revising FY12-13E net profits higher by 6.4% and 7.3% to RM46.7m-RM55.5 from RM43.9m-RM51.7m previously as we imputed in a higher other operating income for the group as reported in the latest results.

Rating    Maintain OUTPERFORM

Valuation   Inline with earnings estimate, we have revised Oldtown's TP higher to RM2.40 (from RM2.26 previously), based on an unchanged PER of 14.5x over its FY13 EPS. The new PER represents a +1.5SD above the average PER since its listing. However, should the underlying weak market sentiment to continue, we may relook at our Target  PER and Target Price despite its resiliency.

Risks   The global economic uncertainty may impact consumer spending, which will consequently affect the company's earnings prospects.    

Source: Kenanga