All Information About Parkson Holdings Berhad ( Visin and Mission)

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RETAILING

PARKSON HOLDINGS BHD

14 September 2012

(PKS MK, PKNS.KL)

Excellent play on China’s stimulus expectations

BUY

Company report

(Maintained)

Low Soo Fang
low-soo-fang@ambankgroup.com

Rationale for report: Company Update

+603 2036 2292
Price
Fair Value
52-week High/Low

RM4.58
RM6.30
RM5.90/RM4.30

Investment Highlights



We re-affirm our BUY recommendation on Parkson
Holdings Bhd (PHB), with a higher sum-of-parts fair value
of RM6.30/share (vs. RM6.20/share previously) as we
raised our average sales/GFA growth rates in anticipation
of a recovery in China retail sales growth going into
CY2013.



We believe PHB is an excellent play on China’s stimulus
expectations. Measures by the Chinese government to
bolster growth to achieve its 2012’s target GDP growth of
7.5% will be a positive consumption boost. Such a move
appears likely. As it is, China’s Aug PMI data of 47.8 (MoM: -1.7ppts) is the lowest since Nov last year, and likely to
prompt authorities for a more decisive action.



More importantly, we reckon the balance of risk is now
leaning to the upside. Whilst modest, we see a sequential
rise in SSSG for China ops, off a historical low of 2.9%
(1HCY2012). To put things into perspective, SSSG was
4.9% higher during the global financial crisis (June 2009).
This suggests SSSG could be approaching its trough, with
downside risks now limited.



Meanwhile, its principal markets under 67.6%-owned
Parkson Retail Asia (PRA Sp Equity, Non-rated) are
expected to deliver stable growth, led by the supportive
macro environment in both Malaysia & Indonesia. This
should provide some cushioning against a muted
performance outlook in Vietnam. Malaysia & Indonesia
account for 15%-18% of PHB’s EBIT, while China remains
the group’s earnings backbone at ~80%.



Our FY13F-15F EPS are tweaked upwards by 3%-4%,
underpinned by stronger operating profit growth from:- 1)
Expansion in GFA by a minimum of 14%-15% per annum
as supported by a pipeline of new store openings (FY13F:
+11, FY14F: +13) and; 2) Incremental margin improvement
on the back of declining losses from new stores, namely
China operations.



Valuation is attractive with PER of 12x, well below the
stock’s 5-year mean of 14x, and local peer Aeon Co M
Bhd’s (AEON Mk Equity, Non-rated) 15x. A valuation rerating of 51.5%-owned Parkson Retail Group (PRG Hk Equity, Non-rated), off the stock’s trough of 13x, is a
strong catalyst for PHB.



Other key catalysts include:- 1) Faster-than-expected new
store openings and; 2) Better-than-expected cost
management initiatives.

Key Changes
Fair value
EPS
YE to Jun

FY12

Revenue (RMmil)
Core net profit (RMmil)
EPS (Sen)
EPS growth (%)
Consensus EPS (Sen)
DPS (Sen)
PE (x)
EV/EBITDA (x)
Div yield (%)
ROE (%)
Net Gearing (%)

3,447.5
376.1
34.6
7.1
21.0
13.2
4.3
4.6
15.3
Net cash

FY13F

FY14F

FY15F

3,792.3 4,333.3 4,975.0
407.4
526.8
651.3
37.5
48.5
59.9
8.3
29.3
23.6
38.8
46.5
56.0
10.0
16.0
20.0
12.2
9.4
7.6
3.5
2.6
1.8
2.2
3.5
4.4
14.4
16.7
18.4
Net cash Net cash Net cash

Stock and Financial Data
Shares Outstanding (million)
Market Cap (RMmil)
Book value (RM/share)
P/BV (x)
ROE (%)
Net Gearing (%)

1,086.4
4,975.9
2.47
1.9
15.3
Net cash

Major Shareholders

Narajaya Sdn Bhd (27.5%)
Tan Sri Cheng Heng Jem (20.0%)

Free Float (%)
Avg Daily Value (RMmil)

24.3
4.7

Price performance

3mth

6mth

12mth

Absolute (%)
Relative (%)

1.1
(5.3)

(17.1)
(21.5)

(18.5)
(30.7)

12.00

1,737

9.50

1,497
I
n
d
e
x
1,257 P
o
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n
t
s

)
M 7.00
R
(

1,018

4.50

2.00

S
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p
0
7

M
a
r
0
8

S
e
p
0
8

M
a
r
0
9

S
e
p
0
9
Parkson

PP 12247/06/2012 (030106)

M
a
r
1
0

S
e
p
1
0
FBM KLCI

M
a
r
1
1

S
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1
1

M
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1
2

S
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1
2

778...
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