Oldtown’s FMCG to be the main driver

OldTown to gain from lower interest rates as consumer spending to rise.

KUALA LUMPUR: Oldtown Bhd’s fast-moving consumer goods (FMCG) is expected to continue to be the main driver of growth, riding on the expansion of export sales into Greater China, according to Maybank Investment Bank Research. 

“As for food and beverages, we believe that cost management is crucial as consumers continue to economise. 

“We raise our earnings forecasts by 13-15% for FY17-19. Our target price is raised to RM2.25 on rolling forward valuations (+30sen; unchanged 14.8x mean FY18 PER),” Maybank said. 

The research house said Oldtown’s 3QFY3/17 core net profit of RM24mil took 9MFY17 core net profit to RM51mil.

“The latter represents 88% our and our consensus’ full-year estimates. Recall that nine months typically accounts for about 73% of full-year estimates. 

“The outperformance was mainly due to better-than-expected export sales which partly aided margin expansion,” it said. 

Maybank has raised its earnings forecast for Oldtown by 14%/15%/15% for FY17/18/19, assuming higher export sales. 

“We are now looking at 20%/12%/12% FMCG sales growth for FY17/18/19. We believe that the growth will be driven by exports to Greater China. 

“Recall that Oldtown completed its deliberate move on channel rationalisation in China in early FY17 and we believe that it is now yielding results,” it added.