Friday, December 13, 2013

Parkson Retail Asia : Good value (CIMB)

Parkson Retail Asia
Current S$1.03
Target S$1.51
Good value

We view Parkson’s share price as cheap and believe that its Malaysian operations will benefit from a stronger 2HFY6/14. However, investors hoping for corporate actions may be disappointed in FY14 as the company has no such immediate plans.

Nevertheless, we retain our positive view as Parkson‟s share price has yet to react to the recovering profitability of its Malaysian operations. Our call changes from Outperform to Add under our new rating structure. We maintain our target price, which is based on 20x CY15 P/E, in line with its regional peers. The stock, which is trading at 14x CY15 P/E, may be catalysed by improving profitability for its Malaysian operations.

Stronger 2H for Malaysia
Malaysia should see a stronger 2HFY14, boosted by the national „Visit Malaysia‟ tourism campaign. In 2007 when the campaign was last held, tourist arrivals spiked by 20%. Parkson‟s Greater KL stores, which contribute slightly under 50% of its sales in Malaysia, should benefit. Furthermore, the three stores closed for renovation will reopen by the end of 2Q14. Though the underlying consumer sentiment may remain weak, the worst appears to be over for Parkson as its SSSG was flat in 1Q14 and massive promotions were no longer needed to push sales. December‟s festive sales will be a key indicator.

Meanwhile, consumer sentiments in Indonesia remain robust, despite the hike in fuel prices and depreciating rupiah. The Vietnam market is likely to see a full recovery only in 2015.

Cheap share price
We think there is value in the stock as it has yet to recover from its 35% plunge, despite its Malaysian operations posting a 1Q14 PBT of S$12.5m, which is close to the average of S$14.4m since its IPO. Earnings contribution will also come from the three stores (accounting for ~6% of its GFA in Malaysia) that it reopened in 2Q14. Valuations are supported by a S$191m net cash. However, we think its share price re-rating will more likely be catalysed by an earnings recovery rather than corporate actions. Management indicated that there are no near-term plans for a special dividend or a share sale by the major shareholder to improve liquidity.

The stock has fallen by over 30% following our downgrade in 4Q13. A recovery in its Malaysian operations is the likely catalyst.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 29/11/13

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