Oldtown Bhd (Jan 25, RM1.33)
Maintain buy at RM1.28 with fair value of RM1.55: Oldtown reported last week that its wholly-owned subsidiary, White Café Sdn Bhd, has awarded the tender for the main construction of its new factory in Tasek Industrial Estate, Perak, to Sg Besi Construction Sdn Bhd for a total contract consideration of RM36.7 million.
Construction is expected to be completed by 3Q12 and will be financed by a combination of the utilisation of initial public offering proceeds, bank borrowings and internally generated funds as stated in the group’s IPO prospectus.
Management confirmed the total construction cost for the new fast-moving consumer goods (FMCG) facility is in line with our projection of RM52 million, but this may swell to as high as RM62 million if construction costs escalate. The RM36.7 million announced is for Phase 1, which comprises:
(i) a 2½-storey factory building;
(ii) a 1-storey warehouse;
(iii) 2-storey canteen and training centre;
(iv) 3-storey administration building; and
(v) two guardhouses. Once Phase 1 is completed, Phases 2 and 3 will involve installation of machinery and other equipment, which will cost the group RM15.3 million.
The capital expenditure was expected and has been factored into our earnings forecast. We forecast depreciation expenses of RM14.9 million for FY11 and RM20.2 million for FY12, as we expect higher capital expenditure for the construction of this facility and the opening of new fully-owned outlets.
We believe that the group’s 4QFY11 earnings may well exceed our conservative estimates, justifying our positive view on the stock. We maintain our “buy” recommendation on Oldtown and value the stock at RM1.55, based on 13 times FY12 earnings per share. — OSK Research, Jan 20
Maintain buy at RM1.28 with fair value of RM1.55: Oldtown reported last week that its wholly-owned subsidiary, White Café Sdn Bhd, has awarded the tender for the main construction of its new factory in Tasek Industrial Estate, Perak, to Sg Besi Construction Sdn Bhd for a total contract consideration of RM36.7 million.
Construction is expected to be completed by 3Q12 and will be financed by a combination of the utilisation of initial public offering proceeds, bank borrowings and internally generated funds as stated in the group’s IPO prospectus.
Management confirmed the total construction cost for the new fast-moving consumer goods (FMCG) facility is in line with our projection of RM52 million, but this may swell to as high as RM62 million if construction costs escalate. The RM36.7 million announced is for Phase 1, which comprises:
(i) a 2½-storey factory building;
(ii) a 1-storey warehouse;
(iii) 2-storey canteen and training centre;
(iv) 3-storey administration building; and
(v) two guardhouses. Once Phase 1 is completed, Phases 2 and 3 will involve installation of machinery and other equipment, which will cost the group RM15.3 million.
The capital expenditure was expected and has been factored into our earnings forecast. We forecast depreciation expenses of RM14.9 million for FY11 and RM20.2 million for FY12, as we expect higher capital expenditure for the construction of this facility and the opening of new fully-owned outlets.
We believe that the group’s 4QFY11 earnings may well exceed our conservative estimates, justifying our positive view on the stock. We maintain our “buy” recommendation on Oldtown and value the stock at RM1.55, based on 13 times FY12 earnings per share. — OSK Research, Jan 20
