Oldtown shares at record high

KUALA LUMPUR (April 20) : Oldtown Bhd shares rose 4% to reach its highest since the coffee manufacturer and café operator’s listing in July 2011 after Alliance Research Sdn Bhd initiated coverage on the stock.

Shares of Oldtown climbed six sen to RM1.57 before erasing gains to trade in the red at RM1.50 at 2.41pm. Some 3.6 million shares changed hands.

Alliance analyst Ian Wan expects Oldtown’s earnings to rise at a three-year compound annual growth rate of 26% in anticipation of its café chain and production capacity expansion.

“We initiate coverage on Oldtown with a buy recommendation and target price of RM1.69, based on its 12-month forward price-to-earnings ratio of 13 times,” Wan wrote in a note.

The analyst said Oldtown is also a “good yield play” by virtue of its projected dividend yields of between 4% and 6.6% for financial years ending December 31, 2012 to 2014. This assumes a payout ratio of 50%.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Oldtown’s 10m shares crossed at RM1.30 each

KUALA LUMPUR (March 29): Oldtown Bhd saw 10 million shares crossed in an off-market deal at an average price of RM1.30 a piece.

This was three sen above Wednesday’s closing price of RM1.27.

The shares represented a 3.03% stake in the company’s paid-up of 330 million shares.

At midday, Oldtown was untraded and unchanged at RM1.27.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Stocks to watch: IPPs, Mah Sing, Genting, UEM Land

KUALA LUMPUR (Feb 29): With the current corporate results drawing to an end on Wednesday, investors’ focus would be on the companies with the stronger set of financial results and their prospects for the year ahead as the external and domestic economies slow down.

The important decision would be to pick companies which would be able to ride through slower growth, especially PLANTATION []s and banks with overseas operations.

Among the stocks to watch on Wednesday after independent power producers (IPPs), MAH SING GROUP BHD [], GENTING BHD [] and UEM Land Bhd.

The Energy Commission has invited the first generation of independent power producers to submit their plans to extend the power purchase agreements (PPAs).

These IPPs, whose PPAs were scheduled to end in three to four years, were invited to extend the agreements on condition they would reduce the capacity payments.

Mah Sing Group Bhd posted net profit of RM41.03 million in the fourth quarter ended Dec 31, 2011, up 30.8% from RM31.35 million a year ago, boosted by the property segment.

Its revenue increased by 41% to RM422.12 million from RM299.28 million. Earnings per share were 4.93 sen compared with 3.77 sen. It announced dividend of 11 sen a share.

For FY11, its earnings rose 42.7% to RM168.55 million from RM118.07 million in FY10.

Genting Bhd reported net profit of RM772.91 million in the fourth quarter ended Dec 31, 2011, up 66% from RM465.43 million a year ago.

Its revenue increased by 23.9% to RM5.06 billion from RM4.08 billion. Its earnings per share were 20.94 sen compared with 12.57 sen while it proposed a dividend of 4.5 sen a share.

Group profit before tax was RM1.802 billion, compared with RM1.182 billion a year ago as it included a reversal of RM308.6 million in respect of previously recognised impairment loss relating to the UK casino licenses and a net fair value gain of RM64.4 million on derivative financial instruments.

UEM LAND HOLDINGS BHD [] posted a 3.84% increase in earnings to RM140.56 million for the fourth quarter ended Dec 31, 2011, from RM135.36 million, due to improved performance from the group's various development activities.

It said the board was confident of the group’s prospects in the coming financial year as the on-going projects had unbilled sales of RM1.85 billion as at Dec 31, 2011.

Shareholders of TSM GLOBAL BHD [], who own 28.07% of the paid-up share shares, have offered to acquire all the business, including assets and liabilities, for RM159.24 million or RM1.25 per share.

Property developer, Dijaya Corp Bhd's earnings rose 12.8% to RM39.02 million for the fourth quarter ended Dec 31, 2011, from RM34.59 million a year ago, due to better sales performance and recognition of progress billings from its project launches in 2011.

Revenue was up 53.2% to RM156.19 million from RM101.91 million. Earnings per share were 8.53 sen compared to 7.60 sen a year ago.

KFC Holdings Bhd (KFCH) saw its fourth quarter earnings decline 21.9% to RM38 million from RM48.67 million a year ago.

It said KFC India and KFCH International College continued to incur high initial start-up costs in the current quarter during the gestation period.

QSR BRANDS BHD [] reported net profit of RM38.69 million in the fourth quarter ended Dec 31, 2011, up 9.7% from the RM35.25 million a year ago due to better profits from Pizza Hut Malaysia.

Cafe chain operator Oldtown Bhd recorded RM11.66 million in profits for the fourth quarter ended Dec 31, 2011 as it benefited from an increase in exports of its beverage products and higher selling prices.

Steel contractor Eversendai Corporation Bhd recorded profits of RM36.42 million for the fourth quarter ended Dec 31, 2011, due to higher revenue from current on-going projects. Its revenue was RM313.29 million while earnings per share were 5.41 sen.

For the financial year ended Dec 31, 2011, revenue was RM1.03 billion, while profits were RM119.45 million.

Benalec Holdings Bhd, posted a 52.51% increase in earnings to RM28.84 million for the second quarter ended Dec 31, 2011, from RM18.91 million due to net gain on sale of land in the current quarter.

Its revenue was 40.54% lower to RM26.89 million from RM45.22 million mainly due to certain projects located in Melaka had already reached the completion stage.

RHB CAPITAL BHD [] posted an 8.09% fall in profits to RM348.39 million for the fourth quarter ended Dec 31, 2011, from RM380.15 million due to increased competition among banks.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Higher exports, prices see Oldtown 4Q net profit at RM11.6m

KUALA LUMPUR (Feb 28): Cafe chain operator Oldtown Bhd recorded RM11.66 million in profits for the fourth quarter ended Dec 31, 2011 as it benefited from an increase in exports of its beverage products and higher selling prices.

It said on Tuesday its revenue was RM80.40 million while earnings per share were 5.85 sen. Oldtown proposed an interim single tier dividend of 2.5 sen per share, with a proposed final dividend of 4.0 sen per share.

The group attributed higher exports and selling prices of its beverages and cafe chain operation to its financial performance.

It also cited a gain on disposal of investment in associated companies and of property, plant and equipment amounting RM8.4 million as other reasons for its performance.

For the financial year ended Dec 31, 2011, its revenue was RM285.49 million and profit was RM40.17 million.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

CIMB Research has technical buy on Oldtown at RM1.28

KUALA LUMPUR (Feb 20): CIMB Equities Research has a technical buy on Oldtown at RM1.28 at which it is trading at a price-to-book value of 2.0 times.

It said on Monday that Oldtown broke out of its wedge resistance on Friday with strong volume.

“We see this as a prelude to more upside ahead. If we are right, the next upswing is likely to push prices towards RM1.34, RM1.40 and RM1.50,” it said.

CIMB Research said MACD signal line is poised for a positive crossover while RSI has also hooked upward. The improving technical bodes well for the stock.

It said that aggressive traders may start to nibble now. However, it is crucial to put a stop at below the RM1.20 level. Violating this level is bearish for the stock.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Oldtown plans for double digit growth

Oldtown Bhd’s shares have had their ups and downs since the company made its debut on Bursa Malaysia’s Main Market in July last year. Through much of the second half of last year, the stock was buffeted by rising volatility in global financial markets that saw a broad-based selloff in risky assets. The stock fell to as low as 88 sen in October — from the initial public offering price of RM1.25 — but has since rebounded to RM1.26.

We suspect the stock will fare better this year. Given the prevailing cautious market sentiment, Oldtown’s comparatively resilient business, modest valuations and yield expectations would appeal to the more risk-averse investor.

Comparatively defensive business operations
Oldtown is an established, and one of the most widely known, homegrown consumer brand names in the country. While the company traces its roots back to 1999, when its founders successfully formulated and commercialised their own blend of 3-in-1 instant white coffee mix, it is, perhaps, the downstream diversification into the café chain business that has raised the Oldtown profile over the last few years.

From the first café in Ipoh back in 2005, the business has grown rapidly, and today counts as one of the largest café chain operators in the country — with 183 outlets nationwide as at end-2011. The company also has 13 cafés — including fully-owned, partially-owned, franchised and licensed outlets — in Singapore, Indonesia and China.

Although the quality of food is average, the café draws customers with a reasonably priced menu of popular local offerings such as kaya and butter toast, soft boiled eggs, nasi lemak, curry mee and Ipoh chicken hor fun.

The beverage manufacturing business has been growing at a double-digit pace as well. Oldtown has gradually expanded both its product range and target markets over the years.



In addition to coffee mixes, including variations of white coffee, which remains its primary income generator, the company also sells instant milk tea and three types of roast coffee powder as well as canned ready-to-drink white coffee. The roasted coffee powder products are marketed under the “Nan Yang” brand name.

These products are sold through key distributors appointed in both the local and overseas markets and are available in hypermarkets, convenience stores, petrol kiosks and other food services outlets.

Roughly 44% of beverage manufacturing sales were derived from export markets in 2010. Hong Kong is the company’s largest overseas market, where it is now one of the best-selling instant coffee brand names, second only to Nescafe. Other export markets include Singapore, Taiwan, Thailand, Indonesia, the Philippines, Australia, Canada and the US.

The café chain business accounted for roughly 61% of Oldtown’s total sales in the first nine months of 2011 with the balance coming from the beverage manufacturing operations. Oldtown intends to grow both businesses in tandem.

Expanding café chain locally and overseas
The café chain business is very scalable as testified by its track record — having grown from 75 to 196 outlets over the past four years. That is an average of 30 new outlets per year. If all goes to plan, Oldtown intends to keep up this pace of growth, with new outlets locally and overseas.

For the domestic market, the company plans to open 20 to 30 new outlets annually, half of which will be under its franchise scheme. It is also planning to test out the kiosk concept, which will focus on beverages with a limited food menu. The first kiosk is slated for opening sometime in 3Q12.

The primary concern for the company’s rapid expansion plan is competition, which is intense and growing, among Oriental-style cafes such as PappaRich, Western-style cafes like Secret Recipe, fast-food chains McDonald’s and KFC as well as a whole host of other restaurants and food stalls.

Oldtown has managed to hold its own, with its specially formulated blend of white coffee and tea beverages and a reasonably priced menu. Having said that, it will likely be increasingly difficult to maintain the degree of service and food quality over an expanding chain, which could hurt business if not well executed.

Positively, Oldtown is upbeat that it will acquire halal certification for all 183 cafés in the country before the end of this year. (The food processing centres and beverage manufacturing are already certified.) This will significantly expand its target market, which at the moment is predominantly Chinese.

The move to focus on franchising will also lower the company’s risk and capital expenditure while maintaining growth momentum. This is true for the domestic as well as overseas expansions.

In Indonesia, there are plans to open 75 outlets over the next 10 years, by a company in which Oldtown has a minority stake. For its China expansion, Oldtown signed up a master franchisee for the Guangzhou and Macau provinces last year. The plan is to open up to 175 outlets over a 10-year period. In addition, the company also expects to add two or three new cafés in Singapore annually.

Oldtown has invested in a new food processing centre, which is expected to be operational very soon, to support the China venture.

New capacity to boost manufacturing sales in 2013
The beverage manufacturing business grew at an annual compound rate of nearly 42% between 2007 and 2010. Plans to broaden its export market are expected to sustain strong double digit growth for the foreseeable future.

Building on its good track record in Hong Kong, Oldtown is now targeting the mainland Chinese market as one of its new export markets. Its other new markets are South Korea and Vietnam.

Currently, the manufacturing facility for coffee and milk tea mixes is running at roughly 82% utilisation. The plant is forecast to hit maximum capacity this year. As such, Oldtown is building a new factory in Ipoh and will relocate its existing manufacturing activities there, slated by end-2012. The new facility will double its capacity by 2013, and eventually rise by up to five times to cater for demand growth for the next few years.

Steady earnings growth, modest valuations with fairly decent yields
We estimate the company’s underlying net profit at RM35 million this year, up some 10% from 2010, excluding net one-off gains of about RM3.4 million.

Net profit is forecast to grow by 14% to RM39.9 million in 2012 and and 17% to RM46.7 million in 2013. That implies the stock is trading at fairly modest 10.4 to 8.9 times our estimated earnings for the two years — compared with the average price-earnings ratio for the broader market and our projected growth rate for the company.

Oldtown has a minimum 50% net profit payout dividend policy. Based on our forecast, dividends would total some 5.3 sen per share for 2011, of which 2.5 sen had already been paid. Thus, a final dividend of about 2.8 sen per share is expected.

Dividends will rise to an estimated six sen per share this year, based on our earnings forecast. That will translate to a pretty decent net yield of 4.8% at the prevailing share price of RM1.26.

Including cash from the IPO, Oldtown had net cash totalling RM66.2 million as at end-September 2011. The strong balance sheet is well able to support its dividend policy as well as future expansion plans.


Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.


This article appeared in The Edge Financial Daily, February 3, 2012.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

KLCI edges up at mid-morning, but struggles to sustain early gains

KUALA LUMPUR (Feb 2): The FBM KLCI rose at mid-morning on Thursday, in line with the gains at the key regional markets, but found it hard to sustains its gains.

At 10am, the FBM KLCI was up 7.87 points to 1,529.16, lifted by gains at select blue chips. The index had initially breached the 1,540-level in very early trade.

Gainers led losers by 388 to 188, while 287 counters traded unchanged. Volume was 628.94 million shares valued at RM519.44 million.

At the regional markets, Hong Kong’s Hang Seng Index rose 1.2% to 29,577.00, Japan’s Nikkei 225 added 0.84% to 8,883.94, the Shanghai Composite Index edged up 0.19% to 2,272.28, Taiwan’s Taiex rose 1.15% to 7,635.93, South Korea’s Kospi added 1.42% to 1,987.04 and Singapore’s Straits Times Index was up 0.44% to 2,917.59.

OSK Research director Chris Eng Poh Yoon in his February market outlook on Thursday said the research house’s January Sell call on the FBM KLCI was correct as the market dipped slightly, underperforming almost all major markets in the world.

He said its “Alternative” Top Buys also did well in January with four out of its five Top Buys outperforming the FBM KLCI, namely Supermax, JCY, Old Town and Sarawak Oil Palm

Still, markets performed better than expected and the global rally seems sustained by a flush of liquidity from the Long Term Refinancing Operation (LTRO), he said.

“As such, we are keeping a close eye on the market for the 1st half of Feb. If indeed markets continue to do well, we may be forced to abandon our Bearish stance and upgrade the KLCI to a Neutral with a preliminary year-end target of around 1,600 points.

“To note our 1,466 points current Fair Value will remain intact but it’s a Fair Value not a year-end target,” he said.

Eng said an upgrade would likely see the research house more aggressively promoting the CONSTRUCTION [] and O&G sectors, adding that for now, Consumer stocks are the flavor of the month.

“Top Buys are KPJ, MBSB, QL and Media Chinese as well as Padini which should attract interest as a cheap and good consumer stock,” he said.

On Bursa Malaysia, Petronas Gas added 52 sen to RM16.20, BAT 48 sen to RM49.88, Hartalega 47 sen to RM7.69, Ekovest 21 sen to RM2.96, Kretam and Petronas Dagangan 20 sen each to RM2.55 and RM18.30, Malayan Flour Mills 17 sen to RM4.50, United PLANTATION []s 16 sen to RM20.50, IJM Corp 14 sen to RM5.88 and Lafarge Malayan Cement up 12 sen to RM6.80.

Tebrau Teguh was the most actively traded counter after a takeover offer made by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is offering 76 sen per share – or just one sen above Tebrau’s pre-suspension price of 75 sen.

The stock rose eight sen to 83 sen with 40.7 million shares done.

Other actives included Coastal Contracts, DRB-Hicom, DBE Gurney, UEM Land, Petronas Chemicals, Mudajaya and Jotech.

Decliners included Tahps, Dutch Lady, Melewar, Southern Steel, MPI, Ajinomoto, Glenealy and BHIC.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Stocks to watch: Glenealy, Lingui, Golden Frontier, Oylmpia

KUALA LUMPUR (Jan 28): Three companies -- Glenealy PLANTATION []s (Malaya) Bhd, Lingui Developments Bhd and GOLDEN FRONTIER BHD [] – which face takeovers by their major shareholders are among the stocks to watch in the week ahead, starting Jan 30.

Market sentiment could be given a mild boost after Euro zone finance officials voiced optimism on Friday that a deal to avert a disorderly Greek default was imminent as Reuters reported that key building blocks to resolve Europe's sovereign debt crisis are gradually fitting into place.

On Wall Street, stocks trimmed losses to end little changed on Friday, as investors saw dips in the market as an opportunity to buy into what has been a strong first month of 2012.

The Dow Jones industrial average fell 74.17 points, or 0.58%, at 12,660.46. The Standard & Poor's 500 Index was down 2.11 points, or 0.16%, at 1,316.32. The Nasdaq Composite Index was up 11.27 points, or 0.40%, at 2,816.55.

For the week, the Dow fell 0.5%, the S&P was up 0.1% and the Nasdaq rose 1.1%.

Friday's losses were limited as U.S. Federal Reserve statements this week and economic data kept investors alert for the possibility of another round of monetary stimulus known as quantitative easing, or QE3, Reuters reprted.

At Bursa Malaysia, Glenealy and Lingui could see some trading interest after its major shareholder Samling Strategic Corporation Sdn Bhd (SCC) announced plans to take them private.

SCC offered RM7.50 a share for the plantation-based Glenealy shares, which is a premium of 95 sen or 14.5% above the pre-suspension price of RM6.55. SCC also offered RM1.63 for the timber-based Lingui shares, which was 27 sen or 19.8% above the pre-suspension price of RM1.36.

Golden Frontier’s main shareholder Frontier Equity Sdn Bhd, which owns 41.26% , has served a notice of conditional take-over offer on the company, offering RM1.50 a share for the remaining stake it does not own.

The RM1.50 offer price is a premium of 21.95% or 27 sen over the five-day volume weighted average price (VWAP) of the shares up to Jan 20. The offer price is 27.12% or 32 sen over the one-month VWAP of RM1.18. The pre-suspension price was RM1.21.

Meanwhile, Malaysian Rating Corporation Bhd (MARC) downgraded the rating of OLYMPIA INDUSTRIES BHD []’s outstanding RM49.73 million nominal value redeemable unsecured loan stocks (RULS) loan stocks to B+ from BB-.

However, MARC concurrently revised the rating outlook of these RULS to stable from negative on expectations that Olympia will manage timely disposal of assets to meet its future debt obligations.

The Edge weekly reports that steel players are not benefiting from the recent Thai floods. It said that the optimism proved unfounded as demand fails to materialise due to excess capacity and delays in implementation of big projects.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Oldtown building a new FMCG facility

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



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Oldtown climbs on new factory news

Oldtown Bhd, a Malaysian manufacturer of coffee products and cafe operator, climbed to its highest level in more than a week in Kuala Lumpur trading after saying it is building a new factory worth RM36.7 million.

The stock gained 1.6 per cent to RM1.30 at 9:20 a.m. local time, set for its highest close since Jan. 11. -- Bloomberg



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Oldtown shares edge up on expansion plans

KUALA LUMPUR (Jan 20): Oldtown Bhd shares edged up on Friday after the company said its unit White Cafe Sdn Bhd is investing RM36.65 million in a new factory in Tasek Industrial Estate, Perak to expand its beverage manufacturing operations.

At 9.20am, Oldtown added two sen to RM1.30 with 158,100 shares traded.

The company on Thursday said the expansion would enable it to increase the production capacity by 500%.

It said the CONSTRUCTION [] period was for a period of eight months with completion expected to completed by the third quarter of 2012.

Oldtown said the construction would be financed by a combination of utilisation of the IPO proceeds, bank borrowings and internally generated funds.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Stocks to watch: DiGi, Oldtown, DBE Gurney, 1 Utopia, HWGB

KUALA LUMPUR (Jan 20): Trading on Bursa Malaysia is expected to taper off in a more cautious mood on Friday, ahead of the four-day trading break due to the weekend and two days for the Chinese New Year holidays.

Reuters reported European stocks rose on Thursday in brisk volume, as strong demand and falling yields at Spanish and French debt sales soothed worries over the euro zone debt crisis and triggered sector rotation out of defensives and into banks.

The euro zone banking index, which plummeted 38% last year, was up nearly 5% on Thursday, with Societe Generale ahead 8% and UniCredit 10.5% better. European banks are major holders of euro zone sovereign debt.

At Bursa Malaysia, among the stocks which could see trading interest included DIGI.COM BHD [], Oldtown Bhd, DBE Gurney Resources Bhd, 1 Utopia Bhd (formerly TEJARI TECHNOLOGIES BHD []) and HO WAH GENTING BHD [] [] (HWGB).

DiGi.com earnings rose 18.7% to RM394.22 million in the fourth quarter ended Dec 31, 2011 compared with RM332.02 million a year ago, boosted by tax incentives.

Its net profit rose 34.9% to RM394 million mainly due to tax incentives related to mobile broadband network facilities. Its revenue increased 8.1% to RM1.545 billion from RM1.429 billion, with mobile data revenue exceeding 30% of the group revenue.

For the financial year ended Dec 31, 2011, its earnings rose 6.5% to RM1.254 billion from RM1.178 billion.

Oldtown’s unit White Cafe Sdn Bhd is investing RM36.65 million in a new factory in Tasek Industrial Estate, Perak to expand its beverage manufacturing operations. The expansion would enable it to increase the capacity by 500%.

DBE Gurney confirmed that it is in talks with a shareholder of CI Holding Bhd which includes a private placement exercise. The poultry-based company said it had plans for a private placement to raise funds for its working capital requirement.

1 Utopia posted net losses of RM412,000 in the fourth quarter ended Nov 30, 2011 (4Q11) from a net profit of RM218,000 a year ago due to higher taxation.

It paid RM942,000 in taxes in 4Q11 compared with only RM103,000 a year ago. ts revenue increased by 33.6% at RM129.26 million from RM85.83 million.

HWGB proposed a private placement of up to 48.72 million new shares, or 10% of its paid-up, to raise up to RM17.54 million.

Based on an indicative issue price of 36 sen per placement share, the company is expected to raise up to RM17.54 million.

GEFUNG HOLDINGS BHD []’s issuance of 109.09 million rights shares with 21.82 million warrants was undersubscribed by 43.62%.

At the close of acceptance and payment for the rights shares at 15 sen each with warrants on Jan 12, the total acceptances and excess applications received was about 56.38% of the rights shares with warrants.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Oldtown’s RM36.65m plan for new factory

KUALA LUMPUR (Jan 19): Oldtown Bhd is investing RM36.65 million in a new factory in Tasek Industrial Estate, Perak to expand its beverage manufacturing operations.

Oldtown said on Thursday, its unit White Cafe Sdn Bhd, would be able to increase the capacity by 500% with the new factory.

It said the tender for the new factory was awarded to Sg. Besi Contruction Sdn Bhd for RM36.65 million.

“The CONSTRUCTION [] period shall be for eight calendar months from the planned date of site possession on Feb 1, 2012. It is expected to be completed by third quarter of year 2012,” it said.

Oldtown said the financing of the projects would be from the IPO proceeds, bank borrowings and its own funds.



Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

OldTown’s old tradition in modern setting

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.




Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.

Are weak IPOs worth another look?

KUALA LUMPUR: Many of this year’s initial public offering (IPO) stocks have been among Bursa Malaysia’s worst performers — but are they now worth another look?

Interest certainly appears to be returning to them, as investors are starting to take notice of stocks that have fallen under the radar and are offering good bargains.

In the past 1½ weeks, stocks such as UOA Development Bhd, MSM Malaysia Holdings Bhd and Petronas Chemicals Group Bhd have regularly dominated either the top actives or gainers lists, while others like Oldtown Bhd and Benalec Holdings Bhd have bounced well off their lows on high volume.

Many of the newly listed stocks slumped after their debuts. Fuelled by weak market sentiment, they have fallen more than the general market due to a high number of short-term investors, such as venture capitalists, high net worth placees and short-term institutional funds, exiting these stocks, said industry observers.

The renewed interest in IPOs was triggered on Oct 13, when UOA emerged from almost nowhere as one of the most actively traded stocks, closing 22 sen or 17.2% higher at RM1.50.

The stock again emerged as one of the most actively traded a week later last Thursday when it surged 19 sen or 12.58% to RM1.70.

Though ending last Friday lower at RM1.59, the stock has gained 37.1% since hitting a low of RM1.16 on Sept 27. Its net assets per share was RM1.35 as at June 30.

Even now, the stock is still 38.8% off its IPO price of RM2.60 when it was listed on June 8. During its lows, few had noticed that UOA had actually slumped more than 55.4%.

The Edge Financial Daily took a look at some of the best and worst performing IPOs this year, and which stocks may be of interest to investors.

As at last Friday, only eight out of 26 companies listed this year were winners.

The two biggest losers were MClean Technologies Bhd (-68.3%) and XOX Bhd (-69.4%), for fairly obvious reasons as their results have been less than impressive.

They were followed by UOA (-38.8%), Maxwell International Holdings Bhd (-34.3%), Oldtown (-12.8%), and Hibiscus Petroleum Bhd (-10%).

Listed on the ACE Market on May 10, MClean’s share price has dropped 68.3% to 16.5 sen from its listing price of 52 sen.


MClean, which provides precision cleaning services for hard disk drives, caused shock waves when it announced a net loss of RM190,000 just three weeks after its listing in May.

Another ACE Market-listed company, XOX tumbled 69.4% to close at 24.5 sen last Friday, compared with its offer price of 80 sen.

XOX also stunned when it reported a loss of RM1.66 million for 1QFY11 just a day before its debut. The loss sent its share price south by more than 35% on its debut. For its 2QFY11, XOX reported a net loss of RM2.92 million, due to higher selling and distribution expenses.

Value among major losers?
Not all of the IPOs that fared badly were due to their fundamentals, with UOA, Maxwell and Oldtown among those that could look attractive.

Affin Investment Bank has a “buy” call on UOA with a target price of RM2.07.

“We believe that value has emerged after UOA’s sharp share price correction,” it stated in an Oct 12 report.

UOA recently strengthened its landbank with the proposed acquisition of 9.8 acres of freehold land in Kepong for RM72.9 million or RM170 psf.

The report said it expects UOA’s other standalone residential projects such as Setapak Green and Sri Petaling and current unbilled sales of RM684 million to help sustain its medium-term earnings and dividend yield of over 5.5%.

China-based sports footwear designer and manufacturer Maxwell saw its share price close at 35.5 sen on Friday, down 34.3% from its IPO price of 54 sen in January.

While investors have been cautious of China-based companies in general, Maxwell appears to have a good earnings track record and high dividends to boot.
Between 2006 and 2010, Maxwell’s revenue and net profit saw a compound annual growth rate of 46% and 53% respectively.

For its first half this year, it had a cumulative revenue of RM157.34 million and net profit of RM26.99 million. With half-year earnings per share (EPS) of 6.75 sen, its annualised price-earnings ratio (PER) would be just 2.63 times.

Maxwell paid its maiden dividend of 3.35 sen net per share on Sept 28, representing a 9.4% net yield on its prevailing price.

Hibiscus, a special purpose acquisition company, was the first of its kind to be listed on Bursa Malaysia in July. It elicited some negative publicity then for its relatively high premium for what was essentially seen as a cash-rich shell company with management expertise.

From an IPO price of 75 sen though, Hibiscus’ share price has tumbled by 10% to 67.5 sen, above its cash per share of 58.6 sen. Hibiscus has three years from the time of listing to acquire a target company or asset, failing which it will be liquidated.

Meanwhile, despite the resilience of the food and beverage (F&B) sector, Oldtown saw its share price dip by 12.8% to RM1.09 from its IPO price of RM1.25.

Listed in July, the local coffee manufacturer and cafe operator is penetrating the China consumer market by opening its first two cafes in Guangzhou this month. Oldtown has set up a food processing centre in China and is targeting to open more outlets, especially in southern China, to achieve greater economies of scale. Although not rated, a report by OSK Research on Sept 20 valued Oldtown at 12.5 times FY11 EPS, which translates into a fair value of RM1.34.

Top performers: Are they still worth buying?
Some of the IPO stocks which had the best returns as at last Friday are Boilermech Holdings Bhd (+93.9%), Berjaya Food Bhd (BFood) (+71.6%), MSM Malaysia Bhd (+42.9%), Bumi Armada Bhd (+20.8%), and Benalec Holdings Bhd (16%).

Listed on the ACE Market on May 5, Boilermech has been the best performing IPO this year gaining 93.9% to 64 sen from its listing price of 33 sen. Still, the stock has fallen 35.7% from an all-time high of 99.5 sen in May.

A biomass boiler manufacturer, Boilermech is a 35% associate company of food and agriculture group QL Resources Bhd. It is primarily engaged in the manufacture of boilers for the plantation, manufacturing and food industries.

Boilermech’s performance, market observers said, was attributed to its strong parent, QL Resources and its exposure to the renewable energy sector.

The second best performer was BFood, which is mainly involved in the operations of Kenny Rogers Roasters (KRR) restaurants in Malaysia. The stock has climbed 71.6% to 87.5 sen last Friday from its IPO price of 51 sen.

With 68 restaurants, BFood plans to open another 15 KRR restaurants in FY12. Via a joint venture, it will also expand its KRR operations in Indonesia where it targets to open 12 stores by end-June 2012.

For its FY11 ended April 30, its net profit was up by 17% to RM10.2 million from RM8.68 million in FY10. Revenue grew by 19% to RM71.9 million from RM60.42 in FY10.

BFood has a clean balance sheet with net cash of about RM31.29 million and no borrowings as at end-July. It paid its first interim dividend of three sen in FY11, amounting to RM4.26 million, which translates into a payout ratio of 41.8% and net yield of 3.4%. BFood’s earnings for FY13 onwards will get a boost from the ongoing acquisition of a 50% stake in Berjaya Starbucks Coffee Co Sdn Bhd, which will be concluded in 1Q12. It targets to open 12 to 15 Starbucks outlets every year.

Last Friday, the stock had a historical PER of 12.4 times and market capitalisation of RM124.24 million. As a comparison, KFC Holdings (M) Bhd has a historical PER of 17.2 times and market capitalisation of RM2.697 billion.

MSM, the largest sugar refiner in the country, was listed at end-June with an IPO price of RM3.50. Its share price had gained 42.9% to RM5 last Friday, partly due to its small free float.

MSM has adopted a dividend policy to pay out at least 50% of its annual net profit. Assuming this payout level, annual dividends are estimated to be 20 sen per share in 2011/12, which translates into a net yield of about 4% at its closing price on Friday.

As at end-June, MSM had net cash of RM141.7 million, which will support future capital expansion. About RM320 million of the RM425 million proceeds from the IPO have been allocated for capital expansion over the next two to three years.

A report by OSK Research on Sept 27 had a “buy” call on MSM with a fair value of RM5.24.

Benalec worth watching
Analysts say Benalec is a stock worth watching, as the company is well-liked for its niche in land reclamation jobs where margins are high and competitors are few. Its land reclamation projects also provide Benalec with ample and low-cost landbank for property development.

Listed on Jan 17, the stock closed at RM1.16 last Friday, 16% above its offer price of RM1, but well below its year high of RM1.61.

Benalec is bidding for land reclamation projects with a combined estimated contract value of RM8 billion and has a large unbilled order book of RM590 million.

AmResearch and Kenanga Research have “buy” recommendations with a price target of RM2.22 and RM1.93 respectively.

Bumi Armada, an oilfield services provider, rose 20.8% to RM3.66 last Friday, compared with its listing price of RM3.03 in July.

In late September, Bumi Armada announced its wholly-owned unit Armada Balnaves Pte Ltd had signed a floating, production, storage and offloading contract with Apache Energy Ltd, Australia. Valued at about RM1.46 billion, the contract is expected to contribute positively to Bumi Armada’s revenue and earnings for FY11 ending Dec 31.


This article appeared in The Edge Financial Daily, October 24, 2011.