We are positive on OTB’s outlook on account of its new FMCG plant in Ipoh and aggressive F&B expansion but trim our numbers to factor in a slight  delay  in  the  commencement  of  the  plant.  The  Group  aims  to convert  its  semi  self-service  outlets  to  full  self-service  ones  in  the medium  term,  as  well  as  roll  out  kiosks  at  petrol  stations  to  target different market segments. Maintain NEUTRAL, with a MYR2.90 FV.

- Commendable FY13 results. Oldtown (OTB) ended its 15-month FY13 on a strong note, chalking up MYR421.5m in revenue and MYR55.5m in net  profit.  For  the  12-month  period  from  Jan-Dec  2012,  the  Group generated revenue of MYR333m and net profit of MYR44.7m. Compared to  FY11,  turnover  and  core  earnings  climbed  16.7%  and  46.1%  y-o-y, bolstered by better sales and stable commodity prices.

- Operating efficiency improves. In the medium term, the Group plans to transform  its  semi  self-service  F&B  outlets  into  full  self-service  ones,  at which  customers  place  their  orders  at  the  counter  and  collect  their food/drinks later. This is to address the problem of labour shortage faced by  F&B  players.  OTB  also  plans  to  set  up  five  to  ten  kiosks  at  Shell petrol  stations  to  tap  into  new  market  segments.  Currently,  it  has  one kiosk in KLCC.

- Slight  hiccup.  In  the  fast  moving  consumer  goods  (FMCG)  segment, OTB’s  24,000-tonnes-a-year new  plant  in  Ipoh  will  only  start  production this month,  three  months  later  than  previously  estimated,  due  to  delays in  installing  a  new  system  and  equipment  for  the  plant  owing  to  the longer  than  expected  time  taken  for  testing  and  commissioning. Likewise, it will only launch its food and beverage (F&B) halal marketing campaign  in  the  second  half  of  this  year  instead  of  the  April  to  June 
target. The Group aims to have all its F&B outlets in Peninsular Malaysia and Singapore certified halal by the end of June.

- Maintain  NEUTRAL.  We  are  revising  down  our  FY14  and  FY15 forecasts  by  15.2%  and  11.8%  respectively  in  view  of  the  delay  in  the commencement  of  operation  at  its  FMCG  plant  and  cut  our  plant utilization rate assumption by 2-5%. Maintain NEUTRAL, with a new FV of MYR2.90, based on 18x CY14 EPS.

Source: RHB