OLD TOWN 5201

China people LOVE Oldtown White Coffee a lot!!!

IPO price	RM 1.25
Current Price	RM1.41
Market Cap	RM465.30

Business: Largest oriental café chain in Malaysia with 196 outlets. Oldtown controls around 42% of white coffee market in Malaysia, 23% of coffee mix in HK and 12% of coffee mix in Singapore. Oldtown has 2 main businesses: i) Café chain (64% of sales) and ii) manufacturing of beverages (instant coffee, 36% of sales).

Oldtown is no longer a successful local story. International expansion (especially into China) will be the multi-year re-rating growth story going forward.

Oldtown, which recently opened its first two outlets in Guangzhou, targets to open 36 more by 2015. Have a cross check on the Sina’s Weibo (China largest micro-blogging website with >300m registered users), we were surprisingly by the China’s overwhelming positive response toward the Old Town white coffee. Some of the comments as below:

*Note: For those who read Chinese, can search”旧街场白咖啡” more in Sina’s Weibo.( www.weibo.com)

The company plans to open 20-30 new outlets annually. While majority of the stores are based in the Klang Valley, there is potential for growth in other states such as Johor, Terengganu and Negeri Sembilan. It is also exploring the idea of setting up kiosk-based outlets to assist new franchise owners with low startup costs in 3Q2012.

For the manufacturing of beverages segment (instant coffee), Oldtown has invested RM36.7m in its new factory in IPOH and an additional RM12m in machinery and equipment. The factory is expected to be completed by 3Q and will increase production capacity by 400%. The utilization rate in 2011 is close to 82% and likely to hit 100% in 2012. With the new capacity, it is well cater to the strong demand from China.

In addition, Oldtown is also planning to venture into Vietnam and South Korea for its FMCG this year as well.  As all know, the entire nation of South Korea loves coffee Korean consumes 350-400 cups of coffee per year vs 250 cups per year for Malaysian. This will be another growth driver for oldtown.

This year FY12 EPS should be around 12.7 sen. Based on the current share px of RM 1.41, oldtown is trading at 11x FY12PER with 20% growth per annum. 50% dividend policies also translate to 4.3% dividend yield. Balance sheet is solid in net cash position.  It’s a long term bet on the stock given the huge potential on the international expansion(especially China.).

Technical Analysis: One to One Breakout Target at RM1.90 for OldTown.

Since IPO, Old Town's stock price has fallen from the high of RM1.40 to a low of RM0.885. The stock price has recently recovered above the high of RM1.40 made in the first trading day, the break above RM1.40 resistance level points to a target price of RM1.90 for Old Town. We don't expect a straight line rally for Old Town, but the probability of a continuation of uptrend has certainly increased with the strong break above the old high with strong volume. Using the breakout system, it suggests that the upside target for Old Town is at RM1.90. 

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Unisem, MPI rally on rating, target price upgrades : CIMB

Unisem, MPI rally on rating, target price upgrades

CIMB Investment Bank upgraded its recommendation and fair values for both MPI and Unisem!

Unisem is upgraded from 'underperform' to 'outperform' and its fair value is raised by 87% from RM1 to RM1.87.

MPI is upgraded from 'underperform' to 'outperform' and its target price is raised from RM2.79 to RM4.08, up 46%.

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MPI 3867

MPI – The worst is over?  

Price	RM 3.04
Market Cap	RM 642.25 mil

Business: Leading semiconductor packaging and services provider in Malaysia. Services offered include manufacturing, assembling and testing of ICs (integrated circuits).

MPI share price was under selling pressure after recent weak 2QFY12 result and rising concerns over Unisem’s loss-making 4Q results. Is the worst is over for MPI? I think there is one more bad quarter result to go however, share price always run ahead of fundamental changes. Therefore, this is the right time to start position on cyclical stock like MPI as its downside risk is limited. Here’s the reasoning;

1)      Global semiconductor industry is bottoming.

      According to SEMI, the semiconductor book to bill ratio has since recover from 0.71x to 0.95x in Jan 2012. (It has been climbing for 4 consecutive months.) To note, during financial crisis in 08/09, book to bill ratio has dropped to 0.47x, but I do not expect it to happen in near-term given the market recovery is in play. Hence, 2Q12 will see semiconductor industry to recover due to inventory restocking. MPI revenue is expected to show strong improvement in 2Q12 with utilization rate and margin to bottom out in 1Q12.

 (Source: SEMI)

2)      Valuation for MPI is at the trough now with limited downside risk.

 MPI is currently trading at 0.83x PB. The lowest PB for MPI is at 0.8x which only happened in year 1999.  Even during financial crisis 08/09, the lowest PB for MPI is at 1.1x. This suggests that the valuation is at the trough with sufficient safety of margin. By using 1.2x PB to conservatively derive the potential target price for MPI at RM4.39, it suggests a 43% upside with dividend yield of ~4%. Balance sheet is solid with only 0.2x net gearing.

3)      So, when is the best time to start position? Now is the time!

Based on analysis on MPI during 08/09 financial crisis, the worst quarter was 3QFY09 (Calendar year =1Q09) and the stock price bottomed out on 1 April 2009 and recovered as much as 50% in 3 months’ time. A similar trend is expected to happen in 2012 as the worst quarter will fall on 1Q12. Therefore, share price should bottom out before 1 April 2012. Hence, March is the best time to start accumulates the stock.Based on our analysis on MPI during 08/09 financial crisis, the worst quarter was 3QFY09 (Calendar year =1Q09) and the stock price is bottoming out on 1 April 2009 and recovery by 50% in 3 months time. We expect the similar trend to happen in 2012 as the worst quarter will fall on 1Q12. Therefore, share price should bottom out before 1 April 2012. Hence, March is the best time to start accumulates the stock.

Technical Analysis: MPI Can Rally to RM 4.50 in Near Term

MPI Daily Chart

Multiple Moving Average (MMA) indicator suggests that the short term MMA (blue) has moved above the long term MMA (red), signalling strong bullish support from traders. This is also the first time since May 2010 that the short term MMA has been above the long term MMA. This is a significant change in trend relationship and points the way to higher prices. Since the strong breakout in January 2010, MPI has retraced to the long term MMA which provides strong support. A move back above the psychologically critical RM 3.00 level has improved the technical outlook for MPI.

Fibonacci and MMA suggest there is a high potential for MPI to hit RM4.50 in near term. 

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