On  30  April  2015,  Parkson  Corporation  SC  (PCSB),  a  wholly  owned subsidiary  of  Parkson  Retail  Asia  (PRA),  had  entered  into  a  70:30  jointventure  (JV)  agreement  with  Studio  Kingdoms  Network  SB  (SKN)  to venture into the  business of operating a theme park, education and nursery centres,  food  and  beverage  (F&B)  operations  and  merchandising operations  in  Malaysia.  SKN  currently  owns  the  "Little  Kingdom"  brand rights for theme parks in Malaysia. (Source: Bursa Malaysia)

Comments:  We  understand  that  the  JV  is  line  with  the  group's  efforts  in diversifying  its  business  and  that  this  new  business  in  "edutainment"  is complementary to the group's current retail operations. The group's first JV project  would  be  situated  in  Maju  Junction  Mall,  Kuala  Lumpur  for  a  total cost  of  RM11m.  We  understand  that  PRA  would  fund  a  total  of  RM8.5m, which will be generated internally while the remaining RM2.5m will be borne by  SKN.  Note  that  PRA  is  currently  sitting  on  a  net  cash  position  of SGD201.8m (or RM532.8m) as of 1HFY15.

We also understand that the group will mainly leverage on SKN's expertise in the new business venture. While we are cautiously optimistic on its plans to develop another income stream, which we think should be positive for the group in  the long-term, we believe that the high start-up costs, particularly for  its  new  upcoming  malls,  and  the  overall  weaker  consumer  spending environment will continue to pressure earnings in the near term.

We keep our earnings forecasts unchanged at this juncture due to the lack of information and maintain our SELL call on the stock. Our SOP-based TP of RM2.00 remain unchanged.

Source: Affin Hwang Capital Research - 5 May 2015