Oldtown: Disappointing Result

Results Update

In QE31/3/2017, Oldtown's net profit plummeted 59% q-o-q or 47% y-o-y to RM10 million while revenue was mixed- down 8% q-o-q but rose 2% y-o-y to RM107 million. PBT dropped q-o-q due to 82%-decline in PBT from Café Chain operation and 52%-decline in PBT for the Beverage Manufacturing operation. Cafe Chain operation suffered mainly due to the provision of RM4.50 million on overdue trade receivable accounts while Beverage Manufacturing operation was affected by higher selling and distribution expenses.


Table: Oldtown's last 10 quarterly P&L

As a result of the poor financial performance, Oldtown's bottom-line is back to the low again.


Graph: Oldtown's last 14 quarterly P&L

Valuation

Oldtown (closed at RM2.78 last friday) is now trading at a PER of 21 times (based on last 4 quarters' EPS of 13.45 sen). At this PER, Oldtown is overvalued. I expect the share price to remain weka for many weeks as investors digest the unpleasant truth that Oldtown may not be a growth stock any time soon and does not deserve its high PE multiples given to it.

Technical Outlook

Oldtown share price plunged on Friday when the QE31/3/2017 result was released after the market closed on Thursday. the share price broke below the horizontal line at RM2.50 before recovery kicked in. I see the immediate support remains at RM2.50-2.60 while the immediate resistance is at RM2.80.


Chart 1: Oldtown's daily chart as at May 26, 2017 (Source: Shareinvetor.com)


Chart 2: Oldtown's monthly chart as at May 26, 2017 (Source: Shareinvetor.com)

Conclusion
 
Based on disappointing financial performance and demanding valuation, I revise my rating for Oldtown from a BUY to a SELL.

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.