KUALA LUMPUR (March 20): Jacobs Douwe Egberts Holdings Asia NL BV (JDE Asia) has received valid acceptances for 456.78 million OldTown Bhd shares, representing a 98.6% stake in the company, following the closing of its offer today. In a filing to Bursa Malaysia, OldTown said the offeror will compulsorily acquire the remaining shares as provided for by the Capital Markets and Services Act 2007 (CMSA).

Whilst OldTown is nearing a de-listing exercise, another pre-mix coffee manufacturer Power Root appears to be losing its shine among the investors (i.e has been reaching historical low in terms of share price). Technically, it is looking quite bearish, with possible support zone at around $1.26 and $1.12.

PWroot20032018.png

Major shareholders / insiders have been selling the stock:

SHF.png

Fundamentally, what should it potentially worth at this juncture? Let’s make some simple assumptions to derive the possible range of indicative value (strictly for illustrative purposes only).

From the following table of historical results, it is quite clear that revenue is growing but profit margins have been declining in recent quarters.

Historical.png

Personally, I intend to assume that revenue is expected to grow at certain nominal rate per annum whilst profit margins may be subject to cyclical element. As such, I will use the historical average PAT margin of 10.0% for my forecast.

As for revenue, I will use simple Excel forecast function to forecast the future revenue with its associated upper and low bounds.

Rev Forecat.png

Based on simple desktop assumptions, I manage to derive broad indicative equity value range for PWRoot of between $1.34  – $1.75, which appears to be relatively higher than the closing price of PWRoot of $1.28 (20 March 2018).

Indicative Value Range.png

One should be always be cautious when the substantial shareholders / insiders are divesting their stakes in the company….

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.