Parkson offers good exposure to discretionary spending by a growing middle class across ASEAN. Malaysia delivers the bulk of its profits currently, but Indonesia looks promising.
We have an unchanged Outperform and target price, still pegged at 20x CY14 P/E, which is at a 20% discount to ASEAN peers. Catalysts are expected from faster-than-expected SSSG and store expansion.
Its home base of Malaysia delivers the bulk of its profits currently (70%) with the strongest SSSG (FY13 expectation: 7%). However, it is Indonesia that could fire up its growth in the next few years. SSSG is currently on par with Malaysia (FY13 expectation: 6%), while there could be faster store rollout. Vietnam, its third market, could come to the fore if its economy picks up. 3Q13‟s SSSG signalled a possible turnaround.
Indonesia looks promising
Management plans to open 4-5 new stores in Indonesia annually (vs. two in Malaysia). Centro stores are expected to jump from nine to 15 while the first Parkson store will open in St Moritz, Jakarta in FY14, offering management a golden opportunity to replicate its success in Indonesia. SSSG has upside potential as management optimises store layouts and merchandise mixes. Margins should increase along with store rollout as head-office expenses can be shared: 4% of gross proceeds in 1H13, down from 6% in FY11, which could be reduced further to about 2%.
Indonesian and Thai retailers trade on average at 24-25x CY14 P/E.
Publish date: 05/08/13