MARKET PERFORM '
Target Price: RM4.86 '

Period
4Q12/12M12

Actual vs. Expectations  
The full year net profit (NP) of RM376.1 came in within estimates, making up 97.7% and 96.7% of the street's estimate and our forecast of RM385m and RM389 respectively.

Dividends
No dividend was declared in the quarter.

Key Result Highlights  

• YoY, FY12 revenue increased 17.9% on the back of new stores openings (13 in total for the year; 8 in China, 2 in Malaysia, 2 in Indonesia and 1 in Vietnam) and decent same-store sales growth ("SSSG") of 9% for Malaysia, 6% for China and 9% for Vietnam.  
• Meanwhile, its property and investment holding segment registered a RM20.2m revenue compared to the previous negligible contribution in FY11. This was mainly due to its first local self-owned and managed retail mall, KL Festival City, which saw increasing occupancy rate and better operating efficiencies. As a result, the overall NP grew 7.9% YoY for FY12.
• QoQ, the 4Q12 sales performance declined 10.0% due to the absence of festive season while the NP dropped further by 24.1% due to higher operating expenses, resulting in a lower net margin of 9.4% as opposed to 11.1% in 3Q12 despite a lower effective tax rate of 24.8% (25.2% in 3Q12). 

Outlook
Earnings prospect remains positive on the back of its new store expansion plan with the management's vision to maintain the SSSG (7-9% for China, 8-10% for Malaysia, 10% for Vietnam and 8-10% for Indonesia). However, we remain conservative and have assumed mainly mid-single digit SSSG for the company given the uncertain global economic condition, which could affect consumer spending.

Change to Forecasts  
Maintaining our earnings estimates of RM422.9m and RM453.8m for FY13-14E.

Rating
Downgraded to MARKET PERFORM

Valuation

• Our rating downgrade is premised on lower valuation premium for its Hong Kong listed subsidiary, PRG, as we are concerned over potentially slower growth rates from its China and Hong Kong operations. Besides, the recent disposal of the holding company assets to its Singapore-listed subsidiary (see overleaf for details), PRA, should see a potential de-rating to its valuation multiple as well.  
• We have downgraded our TP to RM4.86 (from RM5.44 previously) based on a SOP valuation. We have cut our PER multiples for PRG and PRA to their respective lowest traded PERs in the past 3 years, which are 17.9x and 16.0x respectively, from 20x and 18x previously. In addition, we have also applied a 25% discount to our full SOP valuation of RM6.48 to account for its 'pure' holding company status. 

Risks
A slowdown in the global economic, especially China, which would cut the purchasing power of consumers.

Source: Kenaga