Stock Name: PARKSON
Company Name: PARKSON HOLDINGS BHD
Research House: OSK
Parkson Holdings Bhd
(June 25, RM5.66)
Maintain buy at increased target price of RM6.75: Due to strong spending by the Chinese consumer, Parkson was spared the worst of the economic crisis last year, as its quarterly year-on-year (y-o-y) margins and profit had continued to go up since 1QFY09 despite higher A&P expenses.
Apart from support from its China operation, which recorded a decent 7.5% average same-store-sales (SSS) growth, Parkson saw surprisingly impressive average SSS growth in Malaysia as well as Vietnam. The former achieved a 9MFY10 SSS growth of 10.1% while the latter chalked up 29%, beating guidance of 5%-6% and 20%-25%, respectively.
With the strong retail sales growth in China (Jan-May, +23.7% y-o-y) and Vietnam (Jan-May, +36% y-o-y), we believe Parkson's average SSS growth should remain strong.
With regard to its expansion plan, Parkson's total retail space has expanded by 23.4% year to date( YTD). In FY11, the plan is to open three more stores in China (Zigong, Baoding and Changzhou), three stores in Malaysia (Kuala Terengganu, Festival City and Avenue) and one in Vietnam (Hanoi). These will see total retail space expanding by 8.7% compared to FY10.
The group also expects to inject one of its excluded stores into Parkson Retail Group anytime soon. We raised our earnings forecast by 1.7%-1.8% to factor into our in-house forecast of RMB appreciation of 2% against the ringgit.
Our target price is hence raised to RM6.75 which is based on RNAV of 24 times PE for its China operation, 12 times PE for its Malaysia operation and 10 times PE for Vietnam and excluded stores.
Despite its large exposure in China and high-growth countries such as Vietnam as well as resilient earnings growth even during poor economic conditions, the stock is only trading at 14 times forward PE versus AEON's (a sole local retailer) forward PE of 11 times.
Parkson is our top big-cap pick for the consumer retail sector. ' OSK Research, June 25
This article appeared in The Edge Financial Daily, June 28, 2010.
Company Name: PARKSON HOLDINGS BHD
Research House: OSK
Parkson Holdings Bhd
(June 25, RM5.66)
Maintain buy at increased target price of RM6.75: Due to strong spending by the Chinese consumer, Parkson was spared the worst of the economic crisis last year, as its quarterly year-on-year (y-o-y) margins and profit had continued to go up since 1QFY09 despite higher A&P expenses.
Apart from support from its China operation, which recorded a decent 7.5% average same-store-sales (SSS) growth, Parkson saw surprisingly impressive average SSS growth in Malaysia as well as Vietnam. The former achieved a 9MFY10 SSS growth of 10.1% while the latter chalked up 29%, beating guidance of 5%-6% and 20%-25%, respectively.
With the strong retail sales growth in China (Jan-May, +23.7% y-o-y) and Vietnam (Jan-May, +36% y-o-y), we believe Parkson's average SSS growth should remain strong.
With regard to its expansion plan, Parkson's total retail space has expanded by 23.4% year to date( YTD). In FY11, the plan is to open three more stores in China (Zigong, Baoding and Changzhou), three stores in Malaysia (Kuala Terengganu, Festival City and Avenue) and one in Vietnam (Hanoi). These will see total retail space expanding by 8.7% compared to FY10.
The group also expects to inject one of its excluded stores into Parkson Retail Group anytime soon. We raised our earnings forecast by 1.7%-1.8% to factor into our in-house forecast of RMB appreciation of 2% against the ringgit.
Our target price is hence raised to RM6.75 which is based on RNAV of 24 times PE for its China operation, 12 times PE for its Malaysia operation and 10 times PE for Vietnam and excluded stores.
Despite its large exposure in China and high-growth countries such as Vietnam as well as resilient earnings growth even during poor economic conditions, the stock is only trading at 14 times forward PE versus AEON's (a sole local retailer) forward PE of 11 times.
Parkson is our top big-cap pick for the consumer retail sector. ' OSK Research, June 25
This article appeared in The Edge Financial Daily, June 28, 2010.
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