Maybank IB Research
Initial Public Offering
29 June 2011
IPO price: Fair value: RM1.25 RM1.50
Another good thing since sliced bread
Malaysian‟s kopitiam. OldTown is Malaysia’s home grown kopitiam operator with the largest branch network in Malaysia; it also distributes packaged coffee products across the region. Valuing the stock in line with its consumer peers at a prospective 2012 PER of 11.2x, our fair value is RM1.50, or a 20% upside to its listing price of RM1.25. OldTown offers a gross dividend yield of 4.7% at its listing price. Over a decade of history. The group commenced operations with 3in-1 instant coffee manufacturing in 1999 under the “OLDTOWN” brand name and started exporting a year later. OldTown built its second core business in 2005 when the first OldTown White Coffee outlet was opened to public in Ipoh. The vertical expansion into the food services industry has been successful and today OldTown has a total of 182 outlets in Malaysia, Singapore and Indonesia, while its coffee products are exported to 12 different countries. Booming on a bulging midriff. We like OldTown for its stable food and beverage business with visible growth prospects. While consumers’ preferences are constantly changing, we believe the variety of food in OldTown truly caters to everyone’s taste buds making it a preferred hang out spot. The rising purchasing power of the younger population is positive for OldTown because they tend to hang out more often. Management targets to open another 27 (11 already) outlets by end 2011; 22 in Malaysia, 3 in Singapore and 2 more in Indonesia.
Chong Ooi Ming firstname.lastname@example.org (603) 2297 8676 Kang Chun Ee email@example.com (603) 2297 8675
Description: “Kopitiam” operator and pre-mix coffee distributer & manufacturer. Information: Ticker: New Shares Issued (m): Total Issued Shares – post listing (m): Market Cap (RM m): Major Shareholders: Old Town International (ultimately held by xxx) OTB MK 63.4 330.0 412.5 % 58.9
Expanding production capacity. Presently, OldTown manufactures 5.4m tonnes of instant coffee mix and instant milk tea mix per annum at its facilities in Ipoh and Subang Jaya. Part of the IPO proceeds will go towards capacity expansion. With the plan to relocate its coffee and food processing plants in Ipoh into one central location, its logistics will be more efficient to support its extensive network. 15-20% growth in revenue. We expect outlet expansion from café chain operations to contribute to revenue growth of 20.7% and 15.1% in 2011 and 2012 respectively. As for beverage manufacturing, we are looking at revenue growth of 17.5% for 2011 and 17% for 2012, driven primarily by higher utilization and new capacity. Overall, we project turnover growth of 19.6% and 15.8% for 2011 and 2012 respectively, leading to decent net profit growth of 12.6% and 12.5% respectively. OldTown Berh ad– Summary Earnings Table
FYE Dec (RM m) Revenue EBITDA Recurring Net Profit Recurring Basic EPS EPS growth (%) DPS (sen) 2008A 138.4 33.3 20.4 6.2 88.9 2009A 193.7 48.9 30.2 9.2 47.9 2010A 255.1 57.5 31.7 9.6 4.9 2.9 2011F 305.1 69.3 38.4 11.6 21.3 5.8 2012F 353.2 79.8 44.2 13.4 14.9 6.7
PER 20.2 13.6 13.0 10.7 9.3 Dividend Yield (%) 4.7 5.4 ROE (%) 19.2 19.6 EPS based on 330m shares post listing; P/B based on 57sen proforma BVPS @ Dec 10 Sources: Company, Maybank IB
Overview of OldTown
Introduction. Founded in 1999, OldTown began with the manufacturing of 3-in-1 instant coffee. By 2005, OldTown was exporting to Singapore, Hong Kong, the US, UK, Taiwan and Indonesia. The same year, the first “OLDTOWN WHITE COFFEE” outlet was opened in Ipoh beginning its involvement in the café and restaurant business. Now there are 171 cafes across Malaysia, 9 in Singapore and 2 in Indonesia. Chart 1: 182 cafes across Malaysia, Singapore and Indonesia
Sources: Company, Maybank-IB
Business. It is straightforward...
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