PARKSON (FV RM6.42 - BUY) 1HFY12 Results Review: More Steady Numbers

PHB’s 1HFY12 results were  below consensus  but  well  within our estimates. Revenue and net profit improved by  20.5% and  15.3% y-o-y respectively, mainly driven by the opening of new stores and decent SSS growth, but EBITDA margin was thinner on lower other operating income. Given the group’s aggressive plan to enhance its earnings, we maintain BUY on the stock, with an unchanged FV of RM6.42.

Within our estimate. Parkson’s (PHB) 1HFY12  revenue and net profit  stood at RM1.7bn and RM196m respectively,  up  20.5% and 15.3% y-o-y  bolstered by the opening of new stores and improving  operating efficiency. The stronger results were underpinned by a 19.4% y-o-y surge in commissions from concessionaires and 19.6% yo-y growth in direct sales.  China (+10%), Malaysia (+12%), Vietnam (+16.2%) and Indonesia (+9%) all saw decent SSS growth y-o-y, trending on track with management’s SSS guidance (China: mid-to-high single digit, Malaysia: 8-10%, Vietnam: 15-20%, and Indonesia: 8-10%). Vis-à-vis 1QFY12,  revenue and net profit expanded by 15.1% and 17.1% due to stronger consumer spending during the festive and holiday season. Note that during this quarter, the property and investment holding division contributed revenue of RM5.2m from managing its first local self-owned retail mall at KL Festival City, which commenced business in Oct 2011.

Margin moderates. Merchandise gross margin was  a tick lower by  10bps,  down from 19.7% to 19.6% y-o-y while  EBITDA margin  shrank  3% y-o-y  to 30.8%, no thanks to lower other operating income. Other operating income in  1HFY11  incorporate an exceptional gain of RM30.5m from the group’s USD125m 7.125% High Yield Notes and a gross gain on disposal of its Yangzhou store.

More expansion. PHB plans to extend its network by opening 8-10 stores in China, 2 stores in Malaysia, 2-3 stores in Vietnam and 4-5 stores in Indonesia. It is conserving cash for potential M&As, including retail property acquisitions. With more new stores in the pipeline, we are optimistic that the group will deliver satisfactory results  going forward.

Maintain BUY. With more new stores in the pipeline, we are of the view that the group should continue to  deliver satisfactory results in the future. Maintain BUY, with our FV unchanged at RM6.42.

Source: OSK188