OldTown’s 15MFY13 results were above consensus but in line with our forecast,  with  revenue  and  net  profit  coming  in  at  MYR421.5m  and MYR56.1m respectively. Its new FMCG plant in Ipoh, which will kick off operations  next  month,  is  likely  to  fuel  the  Group’s future earnings. However, due to the limited share price upside, we downgrade the stock to NEUTRAL, with our new FV at MYR3.08 (previous FV MYR2.82).

-  As  expected.  OldTown (OTB)’s revenue  and  core  earnings  for  the  15-month FY13 stood at MYR421.5m and MYR56.1m respectively, with the latter  accounting  for  97.9%  of  our  estimate.  There  was  no  performance review  against  the  preceding  YTD  period  as  the  company’s  FY12 comprised  only  12  months’ only.  Against  the  same  period  last  year, turnover  and  net  profit  were  15%  and  3.5%  higher  respectively  as revenue  from  the  food  and  beverage  (F&B)  and  fast  moving  consumer 
goods  (FMCG)  segments  rose  10.5%  and  22.7%  y-o-y.  PBT  from  F&B rose  to  MYR8.8m  for  the  quarter  while  that  from  FMCG  was  flat  at MYR7.3m.  The  better  earnings  were  mainly  driven  mainly  by  strong revenue growth, since EBIT and PBT margins narrowed.

-  Marginal  sales  uptick.  Vis-à-vis  4Q13,  OTB’s  sales  and  earnings inched  up  0.6%  and  2.6%  respectively  in  5Q13.  The  FMCG  unit recorded a healthy PBT growth of 25.9%  q-o-q due to lower advertising and  promotion  costs.  EBIT  margin  improved  from  15.1%  in  4Q13  to 18.3% in 5Q13 while PBT margin rose to 17.9% from 14.6%.

- Mixed progress. OTB has 222 café outlets now and plans to open more stores  domestically  and  abroad,  eg  in  Singapore,  Indonesia  and  China. As  for  the  manufacturing  division,  the company’s new  Ipoh  plant  is expected  to  begin  production  next  month.  There  has  been  a  delay  in installing  new  systems  and  equipment  at  its  FMCG  line  as  the  testing and commissioning had taken longer than expected.

- Downgrade  to  NEUTRAL.  With  the  results  in  line,  we  are  leaving  our forecasts unchanged, but are raising our FV from MYR2.82 to MYR3.08, based  on  18x  FY14  EPS  (vs  15x  previously).  We  also  downgrade  our call  to  NEUTRAL  as  the  stock  has  appreciated  by  38.9%  YTD  and outperformed the market by some 28.4%.

Source: RHB