Actual vs. Expectations 1H15 core PATAMI of RM21.9m (-60% YoY) after stripping out RM108.9m gain from disposal of Festival City mall came in below expectations at 12% and 16% of our and consensus full-year net profit forecasts, respectively. The negative variance from our forecast was due to lower-thanexpected same-stores-sales growth and higher-thanexpected start-up losses.
Dividends Share dividend on the basis of 1 for 20 was declared.
Key Result Highlights YoY, 2Q15 revenue grew 3.5% YoY to RM981m driven by same-store-sales (SSS) growth for Indonesia (+8.8% vs +7.3% in 2QFY14) and first year operations in Maymmar (29%) which more than offset Vietnam (-5.8% vs -2.7% in 2QFY14), Malaysia (-6.7% vs +0.2% in 2QFY14) and China (-4.5% compared to -4.2% in 1Q14) albeit a higher base. Due to stores start-up losses in China, Myanmar and Indonesia, 2QFY15 recorded a loss of RM3m compared to a profit of RM25.6m in 2QFY14. However, including gain from disposal of Festival City mall amounting to RM108.8m, 2QFY15 reported PATAMI came in at RM105.8m.
YTD 1HFY15 revenue rose 2% to RM1.8b. However, core PATAMI collapsed to RM21.9m (-61% YoY) after stripping out the RM108.9m gain from disposal of Festival City mall. In China, the government’s austerity measures and keen competition from online retailers have affected discretionary spending in China resulting in negative SSS growth of 6%. Operating profit declined by 25% to RM49m due to the negative SSS growth and increased operating costs and continuous improvement of margin from effort in allocating more space for complementary service is bearing fruits albeit at a slower pace. Separately, two new stores were opened, namely the Zhengzhou Mix C Store and also the Chongqing Mix C Store. In line with the initiative to build a successful brand portfolio that complements its departmental store business, the Group added another international brand namely Tous from Spain following its maiden collaboration with Mango. Elsewhere, start-up losses in China continue to weigh down on its bottomline.
The weak SSS growth in Malaysia was impacted by weakerthan- expected consumer confidence. In Vietnam, discretionary retail spending remained weak despite signs of economic stability. The Myanmar operations recorded SSS growth of +30% in 1HFY15, driven by FMI Centre, Yangon which recorded strong ramp-up sales after the 1st year of operations.
Outlook Looking ahead, we expect Parkson to continue facing a tough operating environment on the back of weak consumer sentiment due to the economic slowdown, particularly in the China market, which contributes to the crux of its earnings. Coupled with the intense competition from online shopping and oversupply of retail space, we believe it would take a longer period of time for Parkson to reverse its SSSG’s declining trend.
Change to Forecasts We are downgrading both our FY14E and FY15E net profits by 25-32% to take into account the lower SSS growth in China and higher start-up losses.
Rating & Valuation We are downgrading our target price by 14% from RM2.63 to RM2.26 as we impute the consensus’ latest target prices which have been lowered for both its listed operating units (Hong Kong listed Parkson Retail Group Limited and Singapore listed Parkson Retail Asia Limited). Maintain Market Perform rating.
Risks to Our Call A stronger-than-expected economic recovery in China.
Parkson closed with a hammer @ RM 1.99 (-0.06, -2.9%) with extremely high volume done at 42.4m shares on 20 Mar 2015.
Immediate support @ RM1.90, next support @ RM1.86, immediate resistance @ RM2.08, next resistance @ RM2.17.
Parkson (weekly) ~ Trading in a downward sloping channel, biased to the downside
Parkson calms investors as its counter plummets
By Foo Yen Ne 20 Mar 2015
Parkson has issued a statement to calm investors after the company’s shares came under selling pressure over the last few days.
Its counter plunged 19.4% or 48 sen from RM2.47 on March 13, 2015 (last Friday) to close at RM1.99 today, down 6 sen or 2.93% from yesterday’s close.
The counter is now at its lowest in five years. The current price gives it a market capitalisation of RM2.016 billion, which means it saw RM486.27 million in market value wiped out in just seven days.
“The company is not aware of any circumstance within the Parkson group that could have led to this selling pressure on its shares,” it said.
Parkson (fundamental: 1.8, valuation 2.4) was also Bursa Malaysia’s 10th most actively-traded stock today, after some 42.2 million shares having changed hands.
“Parkson wishes to reiterate the group’s fundamentals remain intact with its strategy to pursue with branding and shopping malls development to support and complement its retail business,” it stressed.
“Parkson remains confident in its business fundamentals and prospects, and the overall retail industry,” it added.
The retailer also reminded investors that it had just signed an agreement with Parkson China’s subsidiary yesterday to bring a few renowned brands in the food and beverage sector into China. It also said it is looking to acquire exclusive distributorship of some international fashion brands in Malaysia as signs of its health.
It added it has also started its online shopping facility in Malaysia and China and ventured into shopping malls development in recent years.
It is opening a shopping mall in Qingdao, China, by the end of this year.
It also gave the assurance its consumer financing business, which commenced in November 2014, “is progressing well”.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)
Parkson Retail Asia: The department store operator on Thursday posted a net loss of S$59.8 million for its fourth quarter ended June 30, 2015, compared to net profit of S$3 million a year ago. This is due to the incurrence of non-recurring items related to contingent expenses for the closure of a store in Hanoi and impairment of financial assets in Vietnam, as well as the initial loss-making periods of new stores in their first year of operations, it said. Gross sales proceeds fell 14 per cent to S$211.4 million. It recommended a final dividend of two cents per share. Including the special interim dividend of 4 cents per share paid on Jan 7, 2015, the total dividend for FY2015 is six cents per share. ~ 20 Aug 2015