Parkson Holdings - Shopping for a better FY13F Buy

BUY
Fair Value RM6.20

Investment Highlights 

• We re-iterate our BUY recommendation on Parkson Holdings Bhd (PHB), with an unchanged fair value of RM6.20/share based on our sum-of-parts valuation. 
• PHB wrapped up FY12 with a sequentially lower 4Q net profit of RM78mil (QoQ: -24%), largely due to seasonal factors given the absence of the CNY festivity this quarter. The results are broadly in line with our full-year forecast and consensus estimates. 
• PHB posted higher earnings for FY12, rising 8% YoY on back of an 18% increase in revenue. This was largely attributed to 13 new store openings (China: +8, Malaysia: +2, Indonesia: +2, Vietnam: +1) and maiden full-year contributions from inclusion of Indonesian stores. Bottomline growth trailed topline due to a 4.3ppts-decline in EBIT margin stemming from higher costs mainly in the opening of new stores. 
• Against a backdrop of a challenging outlook, the group recorded a relatively weaker SSSG for FY12, with China at 6%, and 9% in Malaysia, Vietnam and Indonesia. Nonetheless, this is still within our recently-revised expectations of 8%-10% (FY11 SSSG - China: 12%, Malaysia: 10%, Vietnam: 21%). 
• Looking ahead, whilst performance of stores in Vietnam is likely to remain weak in the medium term, we anticipate China’s SSSG to stage a recovery in 2H2012 as the country’s retail industry rebounds from its sector trough. Meanwhile, operations in Malaysia & Indonesia are expected to be stable, given healthy consumer spending. 
• Our long-term bullish view of PHB’s prospects remains unchanged, underpinned by the group’s solid plans for a 14% to 15% expansion in GFA per annum (p.a.) on the back of new store openings (China – 8 to 10, Malaysia – 2, Indonesia – 4 to 5, Vietnam – 2, Cambodia – 1). As it is, a pipeline of five additional stores is being targeted for opening in China by end-2012. 
• Current valuation at 12.5x PER is attractive, well below the stock’s 5-year mean of 14x and local peer Aeon Co (M) Bhd’s (AEON Mk Equity, Non-rated) 15x. 
• PHB remains as the cheaper proxy for tapping into Southeast Asia’s robust consumption play. Potential share price catalysts include:- 1) Faster-than-expected new store rollouts and; 2) Better-than-expected cost management initiatives.

Source: AmResearch