OldTown to gain from lower interest rates as consumer spending to rise.
KUALA LUMPUR: Oldtown Bhd's share price fell to a low of RM2.74 on Friday – the lowest since March 8, after its fourth quarterly results disappointed investors.
At 11.20am, it was down 33 sen to RM2.76. There were 12.56 million shares done.
The FBM KLCI fell 0.18 of a point or 0.01% to 1,773.78. Turnover was 1.05 billion shares valued at RM750.70mil. Decliners beat advancers 557 to 195 while 351 counters were unchanged.
Hong Leong Investment Bank (HLIB) Research said the 4QFY17 core profit after tax and minority interest (PATAMI) declined by 56% to RM9.7mil (from RM22.4mil in 3QFY17).
The weaker earnings were mainly due to seasonality, higher selling and distribution costs at the fast moving consumer goods (FMCG) segment, and RM4.8mil provision for doubtful debts on overdue trade receivables.
The 4QFY17 core PATAMI fell 53% to RM9.7mil on lower contribution from the FMCG segment arising from higher selling and distribution costs in China, and RM4.8mil provision for doubtful debts on overdue trade receivables.
As for FY17 core PATAMI rose 16.5% to RM57.8mil, driven by strong earnings growth at the FMCG segment (arising from higher export sales), which more than mitigated weaker earnings at the café segment (arising from lower revenue, higher staff cost, and RM4.8mil provision for doubtful debts).
HLIB Research said in line with Oldtown’s long term vision, export contribution expanded to 65% from 59% of the group’s total FMCG sales in FY17, driven mainly by a 46% growth export sales to China.
“We note that China (45% of FMCG sales) has replaced Malaysia (35% of FMCG sales) as the largest
contributor of FMCG sales.
“We expect OldTown to continue to make headway in Asia (Asean, China and Taiwan) to exploit the region’s enormous potential and growing middle class amongst the urban population.
"Oldtown is planning to secure further Territorial Licensing Agreements in Vietnam, Cambodia, Hong Kong and Macau in the near future,” said the research house.
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