Oldtown expands business in China

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

PETALING JAYA: Oldtown Bhd is expanding its business in China by appointing a local partner, with the first outlet in Fujian targeted for opening in the third quarter of this year.

The company entered into a territorial licence agreement yesterday with Xiamen Kuaike Investment Management Co Ltd, which will give Xiamen Kuaike the rights to operate the restaurant business under the “Oldtown White Coffee” brand name in Fujian, China.

The deal also allows Xiamen Kuaike the rights to sub-licence to third parties to operate the business in Fujian.

Oldtown said in a filing with Bursa Malaysia yesterday that the initial five-year agreement can be extended up to a total of 15 years.

Xiamen Kuaike is also given the first right of refusal to take up territorial licences for Beijing, Guangdong and Shanghai, “Oldtown and its subsidiairies plans to open more licensed outlets in strategic locations within China,” it said.

As at December 31, 2016, Oldtown has a total of 234 café outlets; 198 in Malaysia, eight in Singapore, 25 in Indonesia, one in Australia, one in China and one in Hong Kong.

“The execution of the agreement is not expected to have any material effect on the earnings or net assets of Oldtown and its subsidiary companies for the financial year ending March 31, 2018.

“Having considered the execution of the agreement, the directors of Oldtown are of the opinion that it is in the best interest of Oldtown Group,” said Oldtown.

For the third quarter ended December 31, 2016, Oldtown posted a revenue and net profit of RM115.81mil and RM24.35mil, respectively, bringing its cumulative nine month revenue and net profit to RM318.24mil and RM50.86mil.

During the quarter, its revenue derived from the manufacturing of beverages segment rose 31% to RM66.52mil from the corresponding period last year due to higher export sales generated.

Meanwhile, the group’s cafe chain operations saw a slight 1% increase in revenue to RM49.29mil during the period.

Oldtown closed 1.9% higher at RM2.70, traded on a volume of 651,400 shares.