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Thursday, February 23, 2017

Oldtown: Cashing In On the Cafe Society Crowd

Results Update

In QE31/12/2016, Oldtown's net profit rose 93% q-o-q or 120% y-o-y to RM24 million while revenue rose 16% q-o-q or 13% y-o-y to RM116 million. PBT rose q-o-q due to 33%-increase in PBT from café chain operation and 98%-increase in PBT for the Beverage Manufacturing operation mainly due to higher export sales.


Table 1: Oldtown's last 10 quarterly P&L


Table 2: Oldtown's Segmental Result for QE31/12/2016 & FYE31/12/2016

As a result of the big jump in the revenue & profits from the Beverages Manufacturing segment, Oldtown's Top-line & Bottom-line were lifted up significantly. I believe this is an earning event that should lead to re-rating of the stock.


Graph: Oldtown's last 13 quarterly P&L

Valuation

Oldtown (closed at RM2.03 yesterday) is now trading at a PER of 13 times (based on last 4 quarters' EPS of 15.33 sen). If the share price is adjusted for the net cash of RM0.33 per share, the PER would be lowered to 11 times. Assuming its final dividend for FY2017 is same as FY2016 (without the special dividend), Oldtown's dividend yield would be about 4.4%. Based on this DY & the adjusted PER, Oldtown is deemed very attractive for a consumer stock.

Technical Outlook

Oldtown has just broken above its triangle (ABC) at RM1.97. This upside breakout of a continuation pattern means that the stock is likely to continue with its prior uptrend.


Chart 1: Oldtown's weekly chart as at June 20, 2016 (Source: Kenanga/Chartnexus)

The monthly chart shows that Oldtown has broken above its intermediate downtrend line, RR at RM1.65 in May last year. Its next resistance will come form the horizontal line at RM2.20.


Chart 2: Oldtown's monthly chart as at Feb 22, 2017 (Source: ShareInvestor.com)

Conclusion
 
Based on satisfactory financial performance, attractive valuation & bullish technical outlook, Oldtown could be a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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