KUALA LUMPUR: Coffee shop chain operator Old Town Bhd, which has seen substantial growth in recent years, is seeking to list on Bursa Malaysia’s Main Market on July 11.

According to the new prospectus on the Securities Commission (SC) website, Old Town’s initial public offering involves  96.4 million shares, or 29.21% of the enlarged share capital of the company, at an offer price of RM1.25 apiece. The IPO comprises an offer for sale of 33 million existing shares and 63.4 million new shares.

Based on the IPO price and its enlarged share capital of 330 million shares of RM1 par each, Old Town’s total market capitalisation will be valued at RM412.5 million upon listing.

The SC posted a draft prospectus of Old Town in February last year. It is uncertain as to why the group did not pursue its listing ambition then, although the weak market conditions at the start of 2010 could be a reason.

The size of the IPO proposed in 2010 was smaller, with plans to issue 59.5 million new shares. There was no offer price or valuation provided for the listing exercise then.

The new IPO price of RM1.25 per share was arrived at based on, among other things, a historical price-earnings ratio of 13 times for FY10 ended Dec 31 based on historical net earnings per share of 9.6 sen and the enlarged group.

Old Town’s net profit has been rising steadily over the past few years with an average annual growth rate of 48%.

For FY09, net profit, in terms of pro-forma consolidated earnings, jumped an impressive 47% year-on-year to RM30.3 million. Revenue rose 40% y-o-y to RM193.7 million. For FY10, net profit grew 5% y-o-y to RM31.9 million on the back of RM255.1 million in revenue, a 32% increase from the previous year.

The bulk of Old Town’s revenue is derived from the operation of its café chain, which made up about 65% of turnover for FY10. The remaining 35% came from the manufacturing of its beverages.

The listing exercise is expected to raise some RM79.2 million for the group, the bulk of which would be used for capital expenditure and acquisition of companies not owned by Old Town International, the group’s largest shareholder.

Old Town International will see its stake in the group reduced to 58.9% from 85.2% post IPO. Old Town’s other shareholders are Lee Siew Heng, the group managing director, and Chin Lai Yoong, whose direct stakes will be reduced from 6.7% and 1.7% to 5.4% and 1.4% respectively.

Lee and Chin are also shareholders of Old Town International with 24.1% and 19.6% respectively. Old Town International’s largest shareholder is Goh Ching Mun who holds a 32.9% stake.

The group currently has 171 outlets in Malaysia, of which 75 are wholly-owned, 10 partially-owned and 86 franchised and licensed outlets. The group also has outlets in Singapore and Indonesia.

Old Town also exports beverages to Hong Kong, the US and Taiwan, among other countries. The group started exporting beverages to New Zealand early this year and intends to expand to Iran and China in the months to come. Overseas sales made up about 19.3% of FY10 revenue.

The group plans to increase its manufacturing capacity to grow its manufacturing arm. Old Town has commenced construction of its new manufacturing plant in Kawasan Perindustrian Tasek, Ipoh, Perak. It is expected to be completed by 2013.

This article appeared in The Edge Financial Daily, May 31, 2011.