Parkson Holdings - 9MFY08 results within expectations (Results Note)
Price: RM6.40
Target Price: RM8.50
Recommendation: BUY
· Parkson Holdings' (PH) annualised 9MFY08 core net profit of RM220.5m is in line with our forecast of RM223.2m, coming in slightly below by 1%, but is 17.7% lower than consensus estimate of RM268.0m. PH benefited from strong performance in all 3 markets, and , as well as an extraordinary gain of RM231.6m arose from the placement Parkson Retail Group (PRG) shares.
· Exceptional gain from PRG share placement, robust same store sales growth and contribution of new stores caused 9MFY08 pretax profit to double YoY, growing by 104%. PH's placement of 8m PRG shares (at HK$78.66 per share) in January 2008 resulted in a one-off gain of RM231.6m. 9MFY08 core net profit rose by 31% to RM165.4m due to strong same store sales growth (of 17%, 5% and 30% in China, Malaysia and Vietnam) and contribution from 6 new stores (3, 2, and 1 in China, Malaysia and Vietnam respectively).
· QoQ, 3QFY08 pretax profit skyrocketed by 160% fuelled by the Chinese New Year festivities and extraordinary placement gain. The 1.5% dilution of PH's interest in PRG (to 53.5%) caused the exceptional gain. QoQ, recurring net profit in 3QFY08 increased by 5% in line with the 4% growth in revenue, from higher China sales in conjunction with the festival season offsetting lower sales in Malaysia due to apparent slowdown in private consumption from inflationary pressures.
· Maintain FY08 and FY09 earnings estimates. Anticipate net profit growth forecast of 65% to be met given sustained retail spending in PH's key markets and potential one-off gain in 4QFY08 of at least RM4.6m (of RM110m total consideration) from the sale of Jet East Investments Ltd to PRG.
· Re-iterate BUY recommendation with target price of RM8.50, derived from our sum-of-parts valuation (applies 30x, 10x and 20x FY09 PERs to Parkson China, Malaysia and Vietnam). Parkson's access to the rapid growth markets of China and Vietnam is expected to counter sluggish consumer spending in Malaysia. Potential risks are slowdown in private consumption in China due to concerns on inflation and negative sentiment related to the Sichuan earthquake.
KENANGA INVESTMENT BANK BERHAD (15678-H)
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Showing posts with label Parkson. Show all posts
Showing posts with label Parkson. Show all posts
Saturday, 21 June 2008
Parkson Holdings - BUY - 23 May 2008
Parkson Holdings - Injection of managed stores to Parkson Retail (Company Update)
Price: RM6.60
Target Price: RM8.50
Recommendation: BUY
· Parkson Holdings (PH) is transferring 2 of its managed stores to Parkson Retail Group (PRG), its 53.5% subsidiary. Jet East Investments Ltd (a wholly-owned subsidiary of East Crest International that is in turn owned by PH) that owns 70% of Parkson Nanning and 100% of Parkson Tianjin, is being acquired by Grand Parkson Retail Group (a wholly-owned subsidiary of PRG).
· Disposal consideration of RMB240.0m (RM110.0m) to be satisfied by a combination of cash and new PRG shares. RMB120m (RM55.2m), half the consideration will be in cash while the remaining RMB120m (RM55.2m) will take the form of 1.99m new PRG shares. The new shares will be issued at HK$67.45 (at 6.1% discount to the average closing price of HK$71.86 over the last 5 days) and expected to be allotted to PH by September 2008.
· Acquisition PER of 11.3x and P/book of 17.7x for Parkson Nanning and Parkson Tianjin is slightly lower than the 16.8x PER PRG paid for a 49% share of the Xi'an Parkson store in March 2008. Proceeds from the disposal will be used by PH for working capital and investment.
· PH's stake in PRG to increase by a marginal 0.2% to 53.7% of enlarged share capital. The divestment will cause a slight dip in earnings by 0.2% from the loss of rental income from the 2 stores, and a one-off gain on disposal of approximately RM46.0m. FY09 FD EPS is expected to increase by 3.7 sen to 28.9 sen as a result.
· FY08 net profit forecast maintained as the disposal is only expected to be completed in September 2008. Revise FY09 net profit estimate upwards by 15% to RM223.2m to take into account the gain on disposal and marginal decline in MI.
· Re-iterate BUY recommendation with revised target price of RM8.50, based on our sum-of-parts valuation comprising PER valuations for China, Malaysia and Vietnam. Potential earnings upside to come from the firm's aggressive expansion into China and Vietnam.
KENANGA INVESTMENT BANK BERHAD (15678-H)
Price: RM6.60
Target Price: RM8.50
Recommendation: BUY
· Parkson Holdings (PH) is transferring 2 of its managed stores to Parkson Retail Group (PRG), its 53.5% subsidiary. Jet East Investments Ltd (a wholly-owned subsidiary of East Crest International that is in turn owned by PH) that owns 70% of Parkson Nanning and 100% of Parkson Tianjin, is being acquired by Grand Parkson Retail Group (a wholly-owned subsidiary of PRG).
· Disposal consideration of RMB240.0m (RM110.0m) to be satisfied by a combination of cash and new PRG shares. RMB120m (RM55.2m), half the consideration will be in cash while the remaining RMB120m (RM55.2m) will take the form of 1.99m new PRG shares. The new shares will be issued at HK$67.45 (at 6.1% discount to the average closing price of HK$71.86 over the last 5 days) and expected to be allotted to PH by September 2008.
· Acquisition PER of 11.3x and P/book of 17.7x for Parkson Nanning and Parkson Tianjin is slightly lower than the 16.8x PER PRG paid for a 49% share of the Xi'an Parkson store in March 2008. Proceeds from the disposal will be used by PH for working capital and investment.
· PH's stake in PRG to increase by a marginal 0.2% to 53.7% of enlarged share capital. The divestment will cause a slight dip in earnings by 0.2% from the loss of rental income from the 2 stores, and a one-off gain on disposal of approximately RM46.0m. FY09 FD EPS is expected to increase by 3.7 sen to 28.9 sen as a result.
· FY08 net profit forecast maintained as the disposal is only expected to be completed in September 2008. Revise FY09 net profit estimate upwards by 15% to RM223.2m to take into account the gain on disposal and marginal decline in MI.
· Re-iterate BUY recommendation with revised target price of RM8.50, based on our sum-of-parts valuation comprising PER valuations for China, Malaysia and Vietnam. Potential earnings upside to come from the firm's aggressive expansion into China and Vietnam.
KENANGA INVESTMENT BANK BERHAD (15678-H)
HLG: 23 May 2008 Parkson Holdings
HLG: 23 May 2008 Parkson Holdings - Selling two China stores to PRG
Parkson Holdings Bhd HOLD
Price target RM7.10
Share price at 22 May RM6.60
Investment summary
Parkson Holdings (PHB) yesterday proposed to sell 2 of its 7 directly-owned China stores to HK-listed subsidiary PRG for RM110m. We think the deal is neutral to PHB, reaffirming our HOLD rating on the stock. We continue to think PHB is an imperfect proxy to PRG’s share price, with few arbitrage opportunities for alpha investors at current levels. Though we expect a modest slowdown in H208 on spillover from a US recession, we remain positive on China’s longer-term macro-economic prospects. China retail sales have been growing at a 15-20% clip for the last 2 years, and a moderation to 5-10% would still be a comfortable growth level for the retail sector.
Index + China = interesting
Share price implies a 10% discount to PRG, which we think is fair. For index investors, we would be buyers at current levels, ahead of a potential recovery in Greater China equity markets. PHB is the only index stock with China growth levels
Parkson Holdings Bhd HOLD
Price target RM7.10
Share price at 22 May RM6.60
Investment summary
Parkson Holdings (PHB) yesterday proposed to sell 2 of its 7 directly-owned China stores to HK-listed subsidiary PRG for RM110m. We think the deal is neutral to PHB, reaffirming our HOLD rating on the stock. We continue to think PHB is an imperfect proxy to PRG’s share price, with few arbitrage opportunities for alpha investors at current levels. Though we expect a modest slowdown in H208 on spillover from a US recession, we remain positive on China’s longer-term macro-economic prospects. China retail sales have been growing at a 15-20% clip for the last 2 years, and a moderation to 5-10% would still be a comfortable growth level for the retail sector.
Index + China = interesting
Share price implies a 10% discount to PRG, which we think is fair. For index investors, we would be buyers at current levels, ahead of a potential recovery in Greater China equity markets. PHB is the only index stock with China growth levels
Tuesday, 1 April 2008
KENANGA: Parkson - BUY - 25 Mar 2008
Parkson Holdings – Further growth from new stores & Setapak mall (Company Update)
Price: RM5.40
Target Price: RM7.00
Recommendation: BUY
· Development of new mall in Setapak. Spring Active Sdn Bhd, a wholly-owned subsidiary of Parkson Holdings (PH), has entered into an agreement with Premier Equity Holdings Ltd, a wholly-owned subsidiary of Fitters Diversified Bhd, to develop a 3-storey shopping centre in Setapak. The total cost of the project is RM214m and is due for completion in 2HCY09.
· Same store sales growth to remain robust in China and Vietnam but restrained in Malaysia. Management anticipates same store sales growth of 15-18% in China, 4-6% in Malaysia and 25-30% in Vietnam for FY08-09. This corresponds to the expected economic growth of the respective countries.
· 10-14 new stores planned for FY08. We understand that the firm intends to open 5-7 new stores in China, 2-3 in Malaysia and 3-4 in Vietnam in FY08. Potential acquisition of managed stores or third party stores in China to boost earnings.
· Revising FY08 net profit forecast upwards by 7%. We are raising the total number of new stores planned to 11 from 10 previously to account for an additional store in China. We are also increasing our estimated capital expenditure by RM113.5m, RM67m and RM34m in FY08, FY09 and FY10 respectively to account for the cost of the Setapak mall.
· Our sum-of-parts valuation utilising PERs of 30x, 10x and 20x applied to FY09 EPS of China, Malaysia and Vietnam gives us a new target price of RM7.00. The lower target price reflects the decrease in the industry’s average FY09 PER in China. We continue to like the stock for its unique access to the rapidly growing retail markets of China and Vietnam.
Price: RM5.40
Target Price: RM7.00
Recommendation: BUY
· Development of new mall in Setapak. Spring Active Sdn Bhd, a wholly-owned subsidiary of Parkson Holdings (PH), has entered into an agreement with Premier Equity Holdings Ltd, a wholly-owned subsidiary of Fitters Diversified Bhd, to develop a 3-storey shopping centre in Setapak. The total cost of the project is RM214m and is due for completion in 2HCY09.
· Same store sales growth to remain robust in China and Vietnam but restrained in Malaysia. Management anticipates same store sales growth of 15-18% in China, 4-6% in Malaysia and 25-30% in Vietnam for FY08-09. This corresponds to the expected economic growth of the respective countries.
· 10-14 new stores planned for FY08. We understand that the firm intends to open 5-7 new stores in China, 2-3 in Malaysia and 3-4 in Vietnam in FY08. Potential acquisition of managed stores or third party stores in China to boost earnings.
· Revising FY08 net profit forecast upwards by 7%. We are raising the total number of new stores planned to 11 from 10 previously to account for an additional store in China. We are also increasing our estimated capital expenditure by RM113.5m, RM67m and RM34m in FY08, FY09 and FY10 respectively to account for the cost of the Setapak mall.
· Our sum-of-parts valuation utilising PERs of 30x, 10x and 20x applied to FY09 EPS of China, Malaysia and Vietnam gives us a new target price of RM7.00. The lower target price reflects the decrease in the industry’s average FY09 PER in China. We continue to like the stock for its unique access to the rapidly growing retail markets of China and Vietnam.
Monday, 17 March 2008
RHB - 17 March 2008 (Parkson)
Top Story : Parkson – Bored with Malaysian Shopping? Go to China and Vietnam! Outperform
Visit Note
- Three key takeways from our recent company visit: 1) According to management, same store sales (SSS) is expected to grow at 15-18% in China, 6% in Malaysia and 25-30% in Vietnam in 2008; 2) Average 10-13 new stores per year to be opened in FY08-10. Over the next three years, Parkson plans to open an average: 5-7 new stores per year in China, 2-3 in Malaysia and 4 in Vietnam; 3) Margins are also projected to be on a rising trend, given Parkson's high operating leverage.
- All in, after we have imputed: 1) a reduction of SSS growth for FY08-10 for China; 2) an increase in SSS growth projections for FY08-10 for Vietnam; and 3) an increase in our new store assumptions for China and Malaysia, our FY08 earnings projection has been reduced by 2%, while our FY09-10 earnings projections have been raised by 3-4% p.a..
- Although we remain bullish on the Chinese and Vietnamese economies, we believe the US sub-prime mortgage crisis could lead to a significant reduction in export income of these countries, thus hampering consumer spending power.
- Given this risk, we now attach a lower 2–year PEG of 1.2x (from 1.5x previously) to value PRG's (China) revised FY08 earnings. We also reduce our target PE multiples for the Malaysian and Vietnamese operations to 12x (from 14x) and 18x (from 20x) CY08 earnings, respectively. Indicative fair value is therefore reduced to RM9.30 from RM11.70 after applying an unchanged 20% holding company discount to the company's revised RNAV of RM11.65. Maintain Outperform.
Visit Note
- Three key takeways from our recent company visit: 1) According to management, same store sales (SSS) is expected to grow at 15-18% in China, 6% in Malaysia and 25-30% in Vietnam in 2008; 2) Average 10-13 new stores per year to be opened in FY08-10. Over the next three years, Parkson plans to open an average: 5-7 new stores per year in China, 2-3 in Malaysia and 4 in Vietnam; 3) Margins are also projected to be on a rising trend, given Parkson's high operating leverage.
- All in, after we have imputed: 1) a reduction of SSS growth for FY08-10 for China; 2) an increase in SSS growth projections for FY08-10 for Vietnam; and 3) an increase in our new store assumptions for China and Malaysia, our FY08 earnings projection has been reduced by 2%, while our FY09-10 earnings projections have been raised by 3-4% p.a..
- Although we remain bullish on the Chinese and Vietnamese economies, we believe the US sub-prime mortgage crisis could lead to a significant reduction in export income of these countries, thus hampering consumer spending power.
- Given this risk, we now attach a lower 2–year PEG of 1.2x (from 1.5x previously) to value PRG's (China) revised FY08 earnings. We also reduce our target PE multiples for the Malaysian and Vietnamese operations to 12x (from 14x) and 18x (from 20x) CY08 earnings, respectively. Indicative fair value is therefore reduced to RM9.30 from RM11.70 after applying an unchanged 20% holding company discount to the company's revised RNAV of RM11.65. Maintain Outperform.
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