OldTown ... Apr13

Its aggressive store rollout strategy and expansion into China may be impressive, but not its same store sales growth. However now that it has 100% halal certification for all its outlets, the group expects SSS growth to enter double digit territory.

While new outlets will help grow revenue, the question is can they sustain sales without cannibalizing the old outlets?

The thing is there is not much SSS growth at the moment. However with its soon to be launched halal campaign, it is expecting at least double digit growth.

Halal certification will provide the group with access to a much wider market. This will boost its organic growth significantly considering its current customer base its mainly non Malay.

In the past couple of months, OldTown has also been focusing on its China efforts. In fact two new deals will soon position the group for expansion in China’s F&B and fast moving consumer goods sectors. This capex will funded by rm64 million that the group had raised via a private placement.

Expect to see a small shift in its earnings – moving towards FMVG – with its new factory in Ipoh and its China operations.

Its prospects are bright with two key drivers: the strong growth of its FMCG segment, which is expected to get a boost from its growing regional mark shares, including an untapped markets like China, South Korea and Vietnam and the opening of more outlets in Malaysia, Singaporem Indonesia and China.

Whether not OldTown’s halal certification helps maintain sales in its local F&B business, its expanding FMCG segment and prospects in China will certainly speed up its pace of growth.