Analysts recommend Oldtown shareholders to accept JDE’s offer

KUCHING: Analysts have recommended that Oldtown Bhd’s (Oldtown) shareholders accept Jacobs Douwe Egberts Holdings Asia NL BV (JDE) share price valuation offer of RM3.18 per share.

In a filing on Bursa Malaysia, Oldtown’s board of directors announced that JDE had received valid acceptances in respect of the offer for a total of 456.8 million Oldtown shares, representing 98.6 per cent of the group.

As JDE does not intend to maintain the listing status of OldTown, Bursa Malaysia Securities Bhd (Bursa Securities) will suspend the trading in all listed securities of OldTown commencing March 28, 2018, being the expiry of five market days from the closing date which was March 20, 2018. This was in accordance with Paragraph 16.02( 3) of the Main Market Listing Requirements.

According to the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), Oldtown was currently facing a tougher outlook going forward due to the challenging outlook for its cafe and outlet operations with the reduction in the number of local outlets.

Additionally, the group was affected by the tapering growth of the manufacturing of beverages’ segment in light of the stronger ringgit as this will have a stronger downside impact on export sales than the benefit gain from a lower raw material costs.

“Going forward, Oldtown will look to leverage on JDE’s deep global expertise in addressing the challenges and build a highly successful partnership with them,” MIDF Research said.

JDE’s valuation of RM3.18 per share represented an attractive premium of 22.31 per cent over MIDF Research’s last target price of RM2.60 per share. This was premised on financial year 2019 (FY19) earnings per share (EPS) of 13sen pegged to FY19 forward price earnings (PE) of 20-fold.

“Therefore, we have recommended shareholders to accept the offer.”

As JDE has accumulated more than 90 per cent holding of OldTown and the stock will cease to be listed soon, the research arm is ceasing coverage on OldTown with a final fair value of RM3.18 per share.