PARKSON HOLDINGS BHD
14 September 2012
(PKS MK, PKNS.KL)
Excellent play on China’s stimulus expectations
BUY
Company report
(Maintained)
Low Soo Fang low-soo-fang@ambankgroup.com Rationale for report: Company Update
+603 2036 2292
Price
Fair Value
52-week High/Low
RM4.58
RM6.30
RM5.90/RM4.30
Investment Highlights
•
We re-affirm our BUY recommendation on Parkson
Holdings Bhd (PHB), with a higher sum-of-parts fair value of RM6.30/share (vs. RM6.20/share previously) as we raised our average sales/GFA growth rates in anticipation of a recovery in China retail sales growth going into
CY2013.
•
We believe PHB is an excellent play on China’s stimulus expectations. Measures by the Chinese government to bolster growth to achieve its 2012’s target GDP growth of
7.5% will be a positive consumption boost. Such a move appears likely. As it is, China’s Aug PMI data of 47.8 (MoM:
-1.7ppts) is the lowest since Nov last year, and likely to prompt authorities for a more decisive action.
•
More importantly, we reckon the balance of risk is now leaning to the upside. Whilst modest, we see a sequential rise in SSSG for China ops, off a historical low of 2.9%
(1HCY2012). To put things into perspective, SSSG was
4.9% higher during the global financial crisis (June 2009).
This suggests SSSG could be approaching its trough, with downside risks now limited.
•
Meanwhile, its principal markets under 67.6%-owned
Parkson Retail Asia (PRA Sp Equity, Non-rated) are expected to deliver stable growth, led by the supportive macro environment in both Malaysia & Indonesia. This should provide some cushioning against a muted performance outlook in Vietnam. Malaysia & Indonesia account for 15%-18% of PHB’s EBIT, while China remains the group’s earnings backbone at ~80%.
•
Our FY13F-15F EPS are tweaked upwards by 3%-4%, underpinned by stronger operating profit growth from:- 1)
Expansion in GFA by a