Parkson Holdings Bhd (PHB) posted a higher net profit of RM106milfor 2Q (YoY: 17%), bringing 1H earnings to RM196mil. Interim earnings made up45% of our forecast and 46% of street estimates. 

We consider the half-time results to be broadly in line withexpectations as we expect earnings to be predominantly backloaded due to theChinese New Year festivity and supportive consumer sentiment (June FY-end).

PHB recorded a 15% rise in net profit for 1HFY12 as turnoverjumped a higher 21% YoY. The benefits of higher gross sales proceeds waspartially offset by lower operating margin which fell 2.7ppts YoY to 23% due tolower gross margin, educational & city development surcharge and new storeopenings. 

We understand the same-store-sales growth (SSSG) of Parksonstores in Malaysia was a strong 12%, ahead of management's guidance of 8%-10%.SSSG of Parkson China came in at 10%, but management is comfortable maintainingits target of mid-to-high single-digit growth for FY12F in anticipation of amoderation ahead. As it is, retail sales growth in China for 4Q2011 was flat at15.8% YoY, versus 3Q2011's 17%.

Meanwhile, Parkson Indonesia and Parkson Vietnam performedwell with SSSG of 10% and 16%, well within management expectations of 8%-10%and 15%-20%, respectively.  The groupopened one new Parkson store each in Malaysia, Indonesia and Vietnam in 2QFY2(KL Festival City in KL, Summarecon Mal Serpong in Tangerang, Indonesia andParkson Landmark 72 in Hanoi, Vietnam). Management is maintaining its guidanceof a total of 8-10 additional stores in China, 2 in Malaysia, 2-3 in Vietnam and4-5 in Indonesia.

No change to our earnings forecasts at this juncture. The group'sproperty & investment holding division which was in the red with a RM7milEBIT loss this quarter should improve over time on the back of an increasingnumber of tenants. The division oversees the management of KL Festival City 'Parkson's first local self-owned retail mall.

We are maintaining our BUYrecommendation on PHB with an unchanged fair value of RM6.84/share based on our sum-of-parts (SOP) valuation. PHBremains a cheaper proxy to HK-listed Parkson Retail Group (PRG Hk Equity, Non-rated)for exposure to China's retail industry, and offers investors exciting growthopportunities via a growing stable of store networks in Malaysia, Vietnam and Indonesia.