It is taking various measures to counter the expected slowdown in domestic consumption over the coming months from March 2014.
These include segmentation its target markets in the café business and expanding the geographical footprint for both is café and fast moving consumer goods (FMVG) businesses beyond local shores.
In fact the export of instant coffee mix has become a key driver for growth and is expected to remain so for the foreseeable future.
Volume sales in China have more than doubled over 2013. Chin is now (March 2014) OldTown’s single largest export market. Exports now (March 2014) account for nearly 57% of total sales for the FMCG arm.
The FMCG growth outpacing that of its café business.
Its shares are now (18 March 2014) trading at 15.4 times and 13.3 times FY2015 and FY2016 respectively.
The company is sitting on net cash of rm122.5 million as at end Dec 2013.
It has a dividend policy to pay out half of its annual net profit. With the bulk of its expansions already completed, capex will decline sharply from that in 2012 and 2013. Thus the company is well positioned to return cash to shareholders.
However it is not planning any bumper payout at least for now (March 2014) – preferring to keep the cash as buffer which will also allow it to take advantage of any acquisition opportunity.
One of the concerns for the stock has been its relatively high foreign shareholding which peaked at 41% stake in June 2013. Since then foreign funds have been net sellers on the local bourse and OldTown shares.
Positively, the decline in foreign shareholders appears to have stabilized some what at around 36% currently (18 March 2014).
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