Hong Leong IB Research maintains Buy on Oldtown, trims target price

by **Cals** Fri 14 Mar 2014, 09:03

Business & Markets 2014

Written by theedgemalaysia.com

Friday, 14 March 2014 08:34

KUALA LUMPUR (March 14): Hong Leong IB Research (HLIB) has maintained its Buy rating on Oldtown Bhd with a lower target price of RM2.29 (from RM2.33) and said Oldtown continues to target similar outlet openings for Singapore and Indonesia while lowering down its target for Malaysia’s and China’s.
In a note Friday, the research house said it believes the slowdown in Malaysia arises as it approaches the saturation point.
“For China, there are some delay due to structural changes and reconfiguration of its master licensing.
“The group is on the move to have its generic café outlets to serve only combo meals and eliminate a la carte menu item, which would improve food quality and efficiencies,” it said.
HLIB said Oldtown would also be coming up with ready-to-eat meals in aim to capture customers during the World Cup period.
It said that on fast moving consumer goods, China had overtaken Hong Kong as the largest export market, in-line with the group’s aim to further penetrate into the China market given its large market size.
“To expedite the process, Oldtown will be setting up its flagship online store under a leading B2C e-commerce portal via TMall in April.
“We tweaked our FY03/15 net outlet openings assumption lower to 24 (from 32 outlets), mainly in China. As such, FY3/15-16 is lowered marginally by 2-3%.
“Post-earnings revision, target price is reduced marginally to RM2.29 (from RM2.33) based on unchanged 17x P/E to FY15 EPS. Maintain Buy,” it said.