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Author: PublicInvest   |   Latest post: Thu, 18 Oct 2018, 09:50 AM

 

PARKSON HOLDINGS BERHAD - Disposal of KL Festival City Mall

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Parkson Holdings (PHB) announced the disposal of its KL Festival City Mall for a cash consideration of RM349m. PHB is expected to record a disposal gain of RM110m, translating to an increase in net assets per share of approximately 10 sen. Apart from strengthening its balance sheet, we believe the disposal will improve PHB‟s cash position (+RM340m) which will help its drive in brand business and premium shopping malls. Pending completion of the deal and FY14(Jun) results release scheduled on Aug 26, we maintain our Outperform call while keeping the target price under review as this disposal could potentially increase our target price by 10 sen to RM2.99.

Rationale for disposal. Under the sales and purchase agreement signed, PHB has agreed to sell its KL Festival City Mall to Festiva Mall SB which is wholly-owned by AsiaMalls SB. PHB is selling the mall mainly due to KL Festival City Mall deemed small (net lettable area of approximately 487,342sqf) to drive PHB‟s expansion plans, as it embarks on the construction of premium shopping malls (with net lettable area of approximately 1m sqf). After completion, PHB will be utilizing the disposal consideration with i) RM200m allocated for general investments including acquisition, development and management of retail malls and ii) RM149m to cover for working capital and expense related to the proposed disposal.

Gains. The disposal consideration of RM349m was arrived based on a willing buyer-willing seller basis after KL Festival City Mall‟s market value of RM353.8m was taken into consideration. This will result in a gain of approximately RM110m and an increase in EPS of approximately 10 sen per share to PHB for FYE June 2015. To recap, KL Festival City Mall is a 3-level shopping with a basement car park and has a current occupancy rate of approximately 99%. The original cost of investment of KL Festival City Mall was approximately RM246m and was acquired in 2008.

Maintain Outperform. Pending completion of the deal and FY14(Jun) results release scheduled on Aug 26, we maintain our Outperform call while keeping the target price under review as this disposal could potentially increase our target price by 10 sen.

Source: PublicInvest Research - 20 Aug 2014

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