Oldtown downgraded to 'neutral' (5201)

Oldtown Bhd is not expected to spring any significant positive earnings
surprises in the remaining quarters of this year, said Alliance
Research.

In a note today, it said the Oldtown's earning growth
for financial year 2012 was still very much dependent on its food and
beverage expansion, which accounted for 62 per cent of its total
revenue in financial year 2011.

"It will require a long of time to break even, unlike the fast-moving consumer goods (FMCG) division," it said.

The
research firm said the company was slated to start to deliver the
market-expected strong earnings growth in first half next year with the
commission of its new FMCG capacity by year-end.

Alliance said
since its initiation coverage of Oldtown with a "buy" call on April 20,
2012, the price has appreciated 44 per cent in less than four months.

"We
believe this was mainly due to foreign investors' aggressive buying as
they take a long-term view on the stock, viewing it as one of the best
proxies to ride on the rising coffee consumption in China," it said.

However, Alliance expected a risk of immediate liquidity dry-up once the foreign investors had accumulated enough position.

Alliance
said despite its target price upgrade to RM2.20 from RM1.72, the upside
was limited due to the recent run-up in Oldtown's share price.

"As
such, we downgrade Oldtown from 'buy' to 'neutral' and suggested
investors wait for a lower entry level, probably RM1.70-RM1.80, as we
believe the share price has run too much ahead of its fundamentals for
now," it said. -- BERNAMA