Can Oldtown Survive In Australia?

Yesterday, Oldtown (White Coffee) has just announced its venture into Australia market.

Nevertheless, I read a local newspaper article recently saying that Starbucks has failed quite miserably in Australia.

From what I understand, coffee is extremely popular among Australians, especially in Melbourne.

Starbucks came into Australia since year 2000 and have 87 chain stores at its climax. However, it has been reduced to only 22 in 2012 until now.

It seems like Starbucks do not fit into the "local coffee culture" of Australia. It was even described as "selling ice to Eskimos".

I think Oldtown should have done a careful market study before making a decision to venture into Australia. What are the strategies it has in order to compete with local coffee chain stores?

I'm not a coffee lover. Any brands of coffee will taste the same for me.

However, I'm aware that most of my friends who look like "coffee experts" will not go to Old Town White Coffee.

Perhaps Oldtown can provide a totally different type of coffee experience to Australian?

Can Oldtown do better than Starbucks in Australia?

Oldtown debut on 11 July

PETALING JAYA: In an updated prospectus draft, Oldtown Bhd is pricing its issue/offer price at RM1.25 per share for its initial public offering (IPO) of 96.4 million shares of RM1 each, instead of offering 59.5 million shares as stated in its first draft posted in February.

The company, which owns and operates the Oldtown White Coffee chain, aims to list on Bursa Malaysia's Main Market on July 11.

According to its prospectus draft, the company is offering 63.4 million new ordinary shares for application by the Malaysian public, directors, eligible employees and business associates of Oldtown and its subsidiaries.

The new shares are also offered to identified investors and bumiputra institutions and investors approved by the International Trade and Industry Ministry. It has an offer for sale of 33 million ordinary shares by way of private placement to identified investors.

The IPO price is based on the historical price earnings ratio multiple for the financial year ended Dec 31, 2010 (FY10) of 13 times which is based on the historical net earnings per share of 9.6 sen and enlarged issued and paid-up share capital of 330 million shares upon listing.

AmInvestment Bank Bhd is its IPO principal adviser, managing underwriter, joint underwriter and joint placement agent. Meanwhile, CIMB Investment Bank Bhd is its joint underwriter and joint placement agent.

Oldtown said the listing exercise would enable the group to gain recognition and enhance its profile through listing status and further augment Oldtown's corporate reputation and assist the group in expanding its customer base locally and overseas.

“It will also provide funds for expansion of Oldtown's business and markets, as such increasing the overall capability of the Oldtown group,” it added.

According to its proforma consolidated statements, Oldtown registered a net profit of RM31.9mil with revenue of RM255.1mil for the financial year ended Dec 31, 2010.

The company plans to raise RM79.2mil gross proceed from its IPO, of which it will utilise RM38.1mil for capital expenditure, RM10.5mil for working capital and RM5.9mil for repayment of bank borrowings.

The company's market capitalisation upon listing amounts to RM412.5mil, based on the IPO price and the enlarged issued and paid-up share capital of 330 million shares

Old Town: Will it get listed?

Old Town White Coffee is seeking approval for listing on 11 July! 

Its financial performance since 2007 looks good indeed.

	2010	2009	2008	2007
Revenue (mil)	255	194	138	79
Net Profit (mil)	32	30	21	11

Base solely on this result, though the profit growth in 2009-2010 slowed down which is a little concern, it can still be an IPO worth applying for.

Old Town's revenue are mainly from its cafe outlets (65%). The rest are from sales of beverage products. Currently it has 183 outlets in Malaysia, Singapore and Indonesia. It just started in Indonesia in 2011. The outlets are either fully owned, partially owned or franchised. The beverage products are exported to countries like US, UK, Canada, China, Japan, Taiwan, Singapore, Indonesia, Thailand & Philippines. Sounds not bad.

    The origin of white coffee

Old Town White Coffee cafe outlets started since 2005. What do you think about the sustainability of its business? I'm not a coffee lover. I do like its Hazelnut coffee, ice-cream toast and the signature butter-kaya toast. Personally I think the food is quite expensive and not very fresh, and they use all foreign workers. In Bukit Mertajam, I can see that there are not many people in the day time but there are quite a lot of them at night.

Initially I thought their business is going downhill but the financial results here say otherwise. Perhaps I need to go to bigger city to have a look. Will Old Town cafe expand to HK, Taiwan or China? Food & Beverage industry is very competitive. Do you think Old Town has the edge to prevail?