Parkson Holdings - Affected by softer CNY sales Buy

- Parkson Holdings Berhad (PHB) reported a rather muted 3QFY12 results, bringing 9M earnings to RM298mil. Results account for 70% of our full year forecast and 72% of concensus. 

- We deem results to be a tad below our expectations as 4Q is expected to be a sequentially softer quarter due to absence of festivities. Consequently, our FY12F-FY13F earnings have been trimmed by 8%-10% based on our revised outlook of a more modest economic growth in China. 

- PHB’s lacklustre performance this quarter was mainly attributed to a lower-than-expected Chinese New Yeardriven sales turnover in key countries of China, Malaysia and Vietnam. Unlike last year, the earlier timing of CNY festivity had resulted in shorter sales promotional days in 2011. As a result, revenue inched up by only 1%. However, net profit fell by 3% due to a higher effective tax rate (QoQ: +2.9ppts).  

- The group’s property and investment holding division had successfully turned into the black with EBIT of RM1mil this quarter. Recall, the division recorded a loss of RM3mil in the preceding quarter. The division which oversees  the group’s first local self-owned retail mall – KL Festival City should continue to see improving performance on back on rising tenants.

- For 9M, revenue was up 18% YoY largely due to healthy same store sales across different countries – Malaysia :10%, China: 7%, Vietnam: 12% and Indonesia: 10%. Despite this, bottom line improvement was only 13% due to EBIT margin compression (YoY: -4.2ppts) from higher operating expenses.  

- Management declared a second interim single-tier dividend of 6sen/share for this quarter, bringing total dividends to 16sen/share for 9MFY12. We forecast total dividends of 20 sen for FY12F, based on a higher dividend payout assumption of 55%. 

- No change to our annual new store forecasts at 8-10 outlets for China, 2 for Malaysia, 2 to 3 for Vietnam and 4 to 5 for Indonesia.

- We maintain our BUY recommendation on PHB with an unchanged fair value of RM6.84/share based on our Sumof-part valuation. The group’s long term growth remains intact, underpinned by expansion in gross floor area from new store openings.   

Source: AmeSecurities