- We re-affirm our HOLD on Parkson Holdings Bhd (PHB), with an unchanged fair value of RM4.43/share, based on a sum-of-parts valuation for FY14F.

- Parkson Retail Asia (PRA Sp Equity) released its 3QFY13 result yesterday. It posted earnings of S$10mil (+1% YoY, -26% QoQ) for the quarter, bringing the total for 9MFY13 to S$35mil (-5% YoY). PRA achieved a 9MFY13 same-store-sales growth (SSSG) of 6% YoY vs. 9MFY12’s 23% YoY.

- Despite the Chinese New Year spending in Malaysia and Vietnam, we believe the weak earnings were due to:- (1) Malaysia experiencing a softening of retail spend in 1QCY13 due cautious sentiment ahead of the general election; (2) Weak consumer sentiment in Vietnam attributed to an economic slowdown; and (3) Lower merchandise gross margin, particularly from increased promotions in Malaysia. Overall margins stood at 23.4% vs. 9MFY12’s 23.9%.

- Indonesia’s SSSG was negatively impacted by weaker sales from Plaza Semanggi, Jakarta given intensification of competition within its proximity. Excluding sales from this store, SSSG Indonesia would have increased by 4.7% and 8.7% for 3QFY13 and 9MFY13, respectively.

- Operations in Vietnam (PBT -36% YoY for 9MFY13) were affected by operating losses at the new store located at Landmark 72 and incurrence of non-operational costs. To capture the upswing in consumption upon recovery of the Vietnamese economy and towards defending its Parkson brand, renovations and space adjustments were undertaken in 1QFY13 at some stores in Ho Chi Minh and Hanoi.

- Sri Lanka’s PLC continued to grow, at a rate of 10% in 3QFY13, supported by robust consumer spending and a strong economy. Having said that, the VAT introduction in January 2013 had slowed sales for big retailers, which is likely to be a short term impact.

- PRA has planned for four store openings by FY13. To-date, a total of two stores have opened in Malaysia and Indonesia. By end-FY13, PRA’s total gross floor area would be lifted by 10%. The first Parkson Myanmar at FMI Centre, Yangon, is now scheduled for opening on 11 May 2013.

- No change to our earnings and SSSG assumptions. Parkson Retail Group’s and PHB’s results are scheduled for release on 15 and 27 May, respectively.

Source: AmeSecurities