Journey to Wealth
Parkson Holdings - Opening New Mall in Melaka
THE BUZZ
Yesterday, Parkson announced that its wholly-owned subsidiary Megan Mastika SB has entered into a conditional sale and purchase agreement with Dimensi Andaman SB for the acquisition of 15 acres out of the 23.22 acres' undivided interest of land located in Kawasan Bandar XLII, Daerah Melaka Tengah, Negeri Melaka for a cash consideration of RM98m.
OUR TAKE
A mixed development. Dimensi Andaman plans to develop an integrated commercial and property development project on the entire 23.2 acres of land which comprises a shopping mall, serviced apartments and a boutique hotel. Parkson, via Megan Mastika, will be setting up the shopping mall. The purchase consideration will be funded internally and is expected to be complete by December 2012.
A sequel to KL Festival City's success. This is an opportunity for the group to develop a shopping mall at a strategic location in Melaka that has famous tourist attractions and is in an area that is planned for a mixed development with a sea frontage. Parkson intends to develop at least three to four malls by 2015; its first mall, KL Festival City located along Jalan Genting Klang, Setapak, was opened in Oct 2011, built with a capex of RM215m.
Still cash positive. As of June 2012, Parkson is in a net cash position of RM1770.4m. Given the cost of construction for the KL Festival City was RM215m for a land size of 8 acres, it will cost Parkson an estimated RM403m to build the 15 acres new Melaka shopping mall, assuming the same plot ratio. The cost of construction plus RM98m land acquisition cost will reduce Parkson's net cash position to RM1269.4m, which is still a huge cash pile.
Maintain BUY. Given the positive track record of the group's success with KL Festival City, we believe the new mall in Melaka will be beneficial for Parkson in the long run to boost its property and management income. Maintain BUY with a FV unchanged at RM5.42.
Source: OSK
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