INVESTMENT HIGHLIGHTS

• JDE has accumulated 98.6% stake in OldTown

• OldTown’s securities will be suspended on 28 March 2018

• Leveraging on JDE’s core expertise

• Ceasing coverage on OldTown

JDE has accumulated 98.6% stake in OldTown. Jacobs Douwe Egberts Holdings Asia NL BV (JDE) has received valid acceptances for 456.8m of OldTown Bhd (OldTown) shares, representing a 98.6% stake in the company, following the closing of its offer at the end of trading day on Tuesday, 20 March 2018.

OldTown’s securities will be suspended on 28 March 2018. As the JDE intends to privatise and delist OldTown, Bursa Securities Securities Berhad will suspend the trading in all listed securities of OldTown commencing on 28 March 2018, being the expiry of five market days from the closing date i.e. 20 March 2018 which is in accordance with Paragraph 16.02(3) of the Main Market Listing Requirements.

Leveraging on JDE’s core expertise. Oldtown is currently facing a tougher outlook going forward due to the: (i) challenging outlook for its café outlet operation with the reduction in the number of local outlets and; (ii) tapering growth of the manufacturing of beverages’ segment in light of the stronger Ringgit as this will have a stronger downside impact on export sales than the benefit gain from a lower raw material costs. Going forward, Oldtown will look to leverage on JDE’s deep global expertise in addressing the challenges and build a highly successful partnership with them

Cease coverage of OldTown. JDE’s valuation of RM3.18 per share represents an attractive premium of 22.31% over our last TP of RM2.60 per share which premised on FY19 EPS of 13sen pegged to FY19 forward PE of 20x. Therefore, we have recommended shareholders to Accept the offer. As JDE has accumulated more than 90% holding of OldTown and the stock will cease to be listed soon, we ceasing coverage on OldTown with a final fair value of RM3.18.

Source: MIDF Research - 21 Mar 2018