OldTown shares maintained as ‘buy’

PETALING JAYA: OldTown Bhd’s potential share price catalysts include stronger-thanexpected fast moving consumer goods (FMCG) sales and value accretive merger and acquisition (M&A).

AllianceDBS has maintained its “buy” recommendation with a RM3.15 target price, pegged to a 12 month forward PE of 19 times. The stock closed at RM2.72 on Friday.

“Stronger than expected contributions from its regional FMCG sales should provide further upside surprises. On the other hand, management is actively pursuing M&A opportunities to enhance its growth prospects,” AllianceDBS said in its report.

It maintained its positive stance on Oldtown on the premise that its fourth quarter of FY17 results, excluding bad debt provisions of RM4.8 million, would have met its expectations.

It said the stock should trade closer to its regional peers. Its target price is higher than consensus as it pegs Oldtown’s target priceearnings (PE) higher at 19 times.

“A stock with multiyear-growth avenues and bright earnings prospects, we believe Oldtown should deserve to trade at a higher PE. Furthermore, our target PE remains low relative to its regional peers’ average PE of over 20 times. Stripping out net cash, our target price implies a forward PE (ex-cash) valuation of 16 times,” said AllianceDBS.

“The stock remains our top pick in the consumer sector. The recent share price weakness offers buying opportunities.”