Price (27 Aug ‘13) RM3.30
Target Price RM3.60
Rough FY13 for Parkson
While FY13 revenue gained 2.4%yoy, operating profit plunged 28.8%yoy.
FY13 net profit was further impacted by a 5.3ppt increased in the effective tax rate applied.
Maintain NEUTRAL at a lower target price of RM3.60
Below expectations. Parkson Holdings Berhad (Parkson or the Group) registered a FY13 net profit of RM240.4m, which lagged ours and consensus’ expectations at 85.2% and 83.9% respectively of full year estimates.
FY13 revenue gained a marginal 2.4%yoy. Parkson’s reported a small 2.4%yoy improvement in revenue to RM801.5m in FY13. Attributing factors were the positive Same Store Sales Growth (SSSG)s recorded from the Group’s stores in Malaysia and Indonesia of +5% and +6% respectively. While the potential growth in revenue was limited by Parkson’s operations in China and Vietnam. SSSG of stores in both countries was -0.1%yoy due to weak consumer sentiment on deceleration of economic growth.
Meanwhile, operating profit plunged -28.8%yoy. A fat -28.8%yoy decline was seen in FY13 operating profit to RM695.1m. The large decline was the results of a proportionately larger growth in operating expenses relative to the growth in revenues. Total operating expenses grew 11.3%yoy to RM3.3b likely relating to higher rental and staff costs relating to the Group’s bullish expansions.
Net profit was further impacted by a higher effective tax. The Group’s FY13 bottom line declined by a larger -36.8%yoy to RM240.4m as a result of a 5.3ppt increment in the effective tax rate applied to 30.0%.
Revised earnings. We cut our FY14 net profit forecasts down by -24.7% to RM256.2m to reflect the economic softening in (i) China, Parkson’s largest geographical segment, and (ii) Vietnam. The Group’s aggressive expansion plans are also likely to result in commensurately higher operating expenses which is expected to cap earning growth in the near term.
Maintain NEUTRAL. We continue to recommend NEUTRAL on Parkson with a lower Target Price (TP) of RM3.60. We derive our TP based on the sum-of-parts valuation.
Publish date: 28/08/13