Stock Name: PARKSON
Company Name: PARKSON HOLDINGS BHD
Parkson Holdings Bhd
(Aug 24, RM5.60)
Maintain buy at RM5.60 with revised fair value of RM6.79 (from RM6.60): We reiterate our 'buy' recommendation on Parkson Holdings Bhd (PHB), with a raised sum-of-parts fair value of RM6.79 (RM6.60 previously) upon rolling forward our valuation base year to CY12F and fine-tuning our earnings forecast by -4% to -5% post full-year results.
PHB posted a higher net profit of RM346 million (year-on-year [y-o-y]: +21%) for FY11. Results met consensus estimates, but came in 8% below our 12-month forecast due to a larger than expected variance owing to currency translation from unfavourable foreign exchange movements (strengthening ringgit against the yuan and the Vietnamese dong). Hence, we deem results to be broadly in line with our expectations.
The improved performance in FY11 was mainly due to: (i) Healthy same-store sales growth (China: +12%, Malaysia: +10%, Vietnam: +21%); (ii) Enlarged network of outlets (China: +4 to 47, Malaysia: +1 to 36, Vietnam: +1 to 7) and; (iii) Earnings before interest and tax (Ebit) margin improvement of one percentage point y-o-y to 29% on better cost control and merchandise mix.
On a sequential basis, revenue and net profit in 4QFY11 declined 11% and 33% owing to seasonally lower consumer spending from the absence of Chinese New Year.
Moving forward, our three-year compounded annual growth rate of 22% for FY12F/FY13F will be well underpinned by the management's accelerated expansion in gross floor area (GFA) by 51.5%-owned Parkson Retail Group. Certainly, a more aggressive strategy to add 20% to 25% GFA against 15% per year previously should lower its average store age and help lift same store sales growth of Parkson outlets in China.
Besides China, PHB's earnings growth would also be buoyed by contributions from additional outlets in Malaysia, Vietnam and Indonesia (under Kem Chicks and Centro brands). We maintain our annual new store forecasts of two each in Malaysia and Vietnam, and four in Indonesia. Total merchandise margin should remain flattish at circa 19.5% to 20%, while fashion and apparel as well as cosmetics and accessories are expected to dominate with 70% to 89% of group revenue.
Despite a moderating macroeconomic outlook in China, we remain positive about PHB's long-term earnings growth trajectory. Expect news flows from the proposed listing of 90.1%-owned Parkson Asia to provide some excitement in the medium term. ' AmResearch, Aug 24
This article appeared in The Edge Financial Daily, August 25, 2011.
Company Name: PARKSON HOLDINGS BHD
| Research House: AMMB | Price Call: BUY | Target Price: 6.79 |
Parkson Holdings Bhd
(Aug 24, RM5.60)
Maintain buy at RM5.60 with revised fair value of RM6.79 (from RM6.60): We reiterate our 'buy' recommendation on Parkson Holdings Bhd (PHB), with a raised sum-of-parts fair value of RM6.79 (RM6.60 previously) upon rolling forward our valuation base year to CY12F and fine-tuning our earnings forecast by -4% to -5% post full-year results.
PHB posted a higher net profit of RM346 million (year-on-year [y-o-y]: +21%) for FY11. Results met consensus estimates, but came in 8% below our 12-month forecast due to a larger than expected variance owing to currency translation from unfavourable foreign exchange movements (strengthening ringgit against the yuan and the Vietnamese dong). Hence, we deem results to be broadly in line with our expectations.
The improved performance in FY11 was mainly due to: (i) Healthy same-store sales growth (China: +12%, Malaysia: +10%, Vietnam: +21%); (ii) Enlarged network of outlets (China: +4 to 47, Malaysia: +1 to 36, Vietnam: +1 to 7) and; (iii) Earnings before interest and tax (Ebit) margin improvement of one percentage point y-o-y to 29% on better cost control and merchandise mix.
On a sequential basis, revenue and net profit in 4QFY11 declined 11% and 33% owing to seasonally lower consumer spending from the absence of Chinese New Year.
Moving forward, our three-year compounded annual growth rate of 22% for FY12F/FY13F will be well underpinned by the management's accelerated expansion in gross floor area (GFA) by 51.5%-owned Parkson Retail Group. Certainly, a more aggressive strategy to add 20% to 25% GFA against 15% per year previously should lower its average store age and help lift same store sales growth of Parkson outlets in China.
Besides China, PHB's earnings growth would also be buoyed by contributions from additional outlets in Malaysia, Vietnam and Indonesia (under Kem Chicks and Centro brands). We maintain our annual new store forecasts of two each in Malaysia and Vietnam, and four in Indonesia. Total merchandise margin should remain flattish at circa 19.5% to 20%, while fashion and apparel as well as cosmetics and accessories are expected to dominate with 70% to 89% of group revenue.
Despite a moderating macroeconomic outlook in China, we remain positive about PHB's long-term earnings growth trajectory. Expect news flows from the proposed listing of 90.1%-owned Parkson Asia to provide some excitement in the medium term. ' AmResearch, Aug 24
This article appeared in The Edge Financial Daily, August 25, 2011.
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