OldTown Bhd
(Dec 23, RM1.11)
Not rated at RM1.09 with a fair value of RM1.25: OldTown operates 193 OldTown White Coffee kopitiam-based café outlets as at November 2011 (up from 75 outlets in FY07) across Malaysia, Singapore and Indonesia. Another growth engine is the manufacture of three-in-one instant beverages sold locally and exported to several overseas markets. In terms of pre-tax profit, its café chain operation is forecast to contribute 66% and beverage manufacturing contributes 34% in FY12F. We have assumed 224 outlets by end-12 and 14% year-on-year beverage sales growth.
As of end-September 2011, OldTown has RM66.2 million net cash. Given its high cash generating business model and stable capex requirement, we forecast net cash position to be around RM74.1 million (22 sen per share) by end-FY11 and RM89.3 million (27 sen per share) by end-FY12.
The strong cash flows means OldTown is in a position to pay regular dividends. Minimum dividend payout policy of 50% is set for FY11F to FY12F. We project dividend per share of 4.9 sen (2.5 sen already paid) this year and 5.3 sen next year yielding 4.5% and 4.8% respectively.
We attach a fair value of RM1.25 based on 12 times FY12F PE after considering its slow-but-stable growth outlook (three-year net profit CAGR at 4%). While there is no direct comparison, its closest peers, KFC Holdings (M) Bhd currently trades at CY12 PE of 19.1 times and Berjaya Food at 13.7 times. OldTown saw its share price tumble from a high of RM1.40 on listing day to a low of 89 sen on Oct 3 before recovering to RM1.09 currently. The stock offers investor exposure to resilient consumer spending in the competitive F&B market. — HwangDBS Vickers Research, Dec 23
This article appeared in The Edge Financial Daily, December 27, 2011.
(Dec 23, RM1.11)
Not rated at RM1.09 with a fair value of RM1.25: OldTown operates 193 OldTown White Coffee kopitiam-based café outlets as at November 2011 (up from 75 outlets in FY07) across Malaysia, Singapore and Indonesia. Another growth engine is the manufacture of three-in-one instant beverages sold locally and exported to several overseas markets. In terms of pre-tax profit, its café chain operation is forecast to contribute 66% and beverage manufacturing contributes 34% in FY12F. We have assumed 224 outlets by end-12 and 14% year-on-year beverage sales growth.
As of end-September 2011, OldTown has RM66.2 million net cash. Given its high cash generating business model and stable capex requirement, we forecast net cash position to be around RM74.1 million (22 sen per share) by end-FY11 and RM89.3 million (27 sen per share) by end-FY12.
The strong cash flows means OldTown is in a position to pay regular dividends. Minimum dividend payout policy of 50% is set for FY11F to FY12F. We project dividend per share of 4.9 sen (2.5 sen already paid) this year and 5.3 sen next year yielding 4.5% and 4.8% respectively.
We attach a fair value of RM1.25 based on 12 times FY12F PE after considering its slow-but-stable growth outlook (three-year net profit CAGR at 4%). While there is no direct comparison, its closest peers, KFC Holdings (M) Bhd currently trades at CY12 PE of 19.1 times and Berjaya Food at 13.7 times. OldTown saw its share price tumble from a high of RM1.40 on listing day to a low of 89 sen on Oct 3 before recovering to RM1.09 currently. The stock offers investor exposure to resilient consumer spending in the competitive F&B market. — HwangDBS Vickers Research, Dec 23
This article appeared in The Edge Financial Daily, December 27, 2011.
