STOCK FOCUS OF THE DAY
OldTown : No significant impact from F&B’s central kitchen explosion BUY
OldTown released an announcement, confirming news reports of an explosion that occurred at its central food processing centre at Subang Jaya, Selangor. The incident occurred in early last Thursday, 21 Sep 2017. Based on our initial estimates, the financial impact is largely insignificant.
According to news reports, the explosion was due to a gas leak, with 8 employees admitted to the hospital. However, management and the respective authorities are still in the midst of ascertaining the cause of the explosion. Based on our initial estimates, the operational impact to earnings is insignificant. Assuming 10% higher food input cost being outsourced for a month, it translates to a -0.8% impact to FY18 earnings. Its F&B segmental earnings contribute c:30% of total earnings.
We ascribe investors to accumulate on any potential weakness based maintain our BUY recommendation and FV of RM3.20. Our FV is based on 17.0x CY18F P/E, which is a 20% discount to simple average PE of its FMCG peers. We continue to like OldTown for its export-driven growth and market leader as #1 white coffee brand in its core markets.
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The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
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