- We reaffirm our BUY recommendation on Parkson Holdings (PHB) with an unchanged fair value of RM3.85/share, pegged to a PE of 22x FY15F earnings – one standard deviation above its 5-year historical mean PE. Stripping out its net cash, PE stands at an attractive 8x.
- 67.6%-owned Parkson Retail Asia (PRA) announced that it has accepted the mandatory offer by Sri Lankan conglomerate Softlogic Holdings PLC and its unit Softlogic Retail (Private) Limited (joint offerors) for the sale of PRA’s entire 47.5% stake (or 129.1mil shares) in Sri Lankan-based department store operator, Odel PLC.
- PRA is selling Odel’s stake for a cash consideration of LKR2,841mil (or Rs22.00/share) or SGD$27.6mil to the joint offerors. This is at a discount of 0.9% to Friday’s closing price of Rs22.20/share.
- The disposal exercise is expected to complete by 2QFY15. As a recap, PRA bought Odel’s stake back in 2012 through the acquisition of shares and subscription of new share via a right issue.
- Management decided to monetise its investment in Odel as the return of investment was not up to PRA’s expectations.
- While the gain on disposal is minimal at SGD$601,000, it would enable PRA to rechannel its efforts to grow its core business within South Asian region moving forward. The disposal would enhance PRA’s balance sheet, resulting in a cash inflow of SGD$27.6mil.
- The impact on PHB is negligible as Odel’s share of associate profits in PRA’s books is SGD$0.88mil for FY14. This constitutes only 2% of PRA’s profit before tax.
- We make no changes to our EPS estimates and BUY call.
- PHB’s current share price weakness (retracement from a high of RM3.13/share in August) presents a good buying opportunity ahead of improving profitability (as it is at an inflexion point), underpinned by PHB’s low base comparison and expectations of improving same-store-sales growth in China. Its brand building initiatives in China resulted in a positive recovery, signaled by smaller SSSG contraction. SSSG for July and August slowed to a negative mid-single digit, from the double-digit level of -11.6% in 4QFY14.
- At the current level, the stock is trading at an attractive PE of 15x – below its 5-year historical mean.
Source: AmeSecurities
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Tang Khangseng
When bear comes, REITs dont fall?
2014-10-13 13:27