3QFY15 (Jun) results were robust, boosted by pre-GST buying in Malaysia. However, we reiterate SELL, with a new RM1.70 TP (from MYR1.96) (16% downside) as we expect buying to drop off in its main market next quarter, and given the weak environment in most of its key markets. Back to its 3QFY15 results, excluding one-off provisioning, we estimate that recurring net profit fell 15.3% YoY to around RM46.6m.

• Strong quarter on the back of pre-GST buying in Malaysia.Parkson’s revenue for the quarter was up 9.5% YoY, driven by good sales volume in Malaysia, ahead of the GST implementation in Apr 2015. Excluding one-off provisioning, recurring net profit fell 15.3% YoY. This was negated by the Vietnam market posting -2.1% same store sales growth (SSSG) and Indonesia slowing down slightly to +6.9% SSSG.
• One-off provisioning made this quarter. As expected, Parkson made a provisioning of RM82.4m (about half is offset against minority interests), based on the dispute between its 53%-owned Parkson Retail Group and its landlord, Metro City in China, which originally started in Apr 2012. Management indicated earlier that it may appeal against this ruling.
• Environment remains weak. Strong buying in Malaysia was mainlyattributable to pre-GST buying in our opinion, and is likely to drop off for the next quarter. Sales were strong for cosmetics particularly, mainly due to stocking up. There was also significant discounting, putting some pressure on margins. Competition in Vietnam remained intense, and the market is unlikely to be profitable this year.
• Maintain SELL. We do not see any evidence of a sustained recovery in earnings for now and remain pessimistic about its overall outlook. We adjust our FY16F/FY17F earnings upwards by 18% and 4% respectively, mainly to account for lower tax rates. Our new TP of RM1.70 remains pegged to 13x FY16F, rolled over from FY15F.