Journey to Wealth
Parkson Holdings - Bargain on the shelves Buy
- Following a recent company meeting, we re-affirm our BUY rating on Parkson Holdings Bhd (PHB) with a revised fair value of RM6.20/share (vs. RM6.84 previously) as we rolled forward our sum-of-parts valuation base year to CY13F.
- While the recent share price weakness is mainly attributable to a weaker-than-expected 1Q results owing to soft sales at 51.5%-owned Parkson Retail Group (PRG), we believe the negatives have largely been priced in.
- We remain bullish about PHB's long-term growth prospects as underpinned by:- 1) China's robust consumption on the back of the country's strong fiscal and political base towards maintaining GDP growth; 2) Solid expansion plans in Southeast Asia with a 14%-15% enhancement in GFA (gross floor area) per annum (p.a.) and; 3) Small but growing earnings stream from its shopping complex management arm (KL Festival City).
- As it is, China operations are well on track for an earnings recovery, with management maintaining a target SSSG of a mid-to-high single digit. To be sure, we understand SSSG in April rebounded to 7%, up from a mere 2% in 1QCY12 due to poor performances at both the Beijing and Shanghai flagship stores which make up ~10%-15% of PRG's sales.
- Meanwhile, operations at principal markets under 67.6%- owned Parkson Retail Asia (PRA) continue to chalk up healthy SSSG, spurred on by positive consumer spending. Except for Vietnam, of which our SSSG forecast has been trimmed to 8% (vs. management-guided 10%) due to a slower-than-expected macro outlook, our SSSG of 8%-10% is maintained for Malaysia and Indonesia.
- All in, our earnings for FY12F-14F have been trimmed by 8%-15% as we assume a lower average sales/GFA growth rate, as well as new outlet openings (Annually - China: 8 to 10, Malaysia: 2, Indonesia: 4 to 5, Vietnam: 2 to 3, Cambodia: 1). Nonetheless, our 3-year earnings CAGRstands at a solid 18%.
- Notwithstanding the narrowed valuation gap between PHB and HK-listed PRG, PHB remains a cheaper proxy for tapping into Southeast Asia's robust consumption play. The group's forward PE of 11x is well below its 5-year mean of 14x and closest peer Aeon Co (M) Bhd's (AEON Mk Equity, Non-rated) 15x.
- Key catalysts include:- 1) Faster-than-expected rollout of new stores; 2) Better cost management initiatives and; 3) Potential acquisition of existing retail stores in other geographical locations outside Southeast Asia.
Source: AmeSecurities
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
