- 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 minimum of
14%-15% per annum as supported by a pipeline of new store openings (FY13F: +11,
FY14F: +13) and; 2) Incremental margin improvement on the back of declining
losses from new stores, namely China operations.
- Valuation is attractive with PER of 12x, well below the stock’s
5-year mean of 14x, and local peer Aeon Co
M Bhd’s (AEON Mk Equity, Non-rated) 15x. A valuation rerating of
51.5%-owned Parkson Retail Group (PRG Hk Equity, Non-rated), off the stock’s
trough of 13x, is a strong catalyst for
PHB.
- Other key catalysts include:- 1) Faster-than-expected new store
openings and; 2) Better-than-expected cost management initiatives.
Source: AmeSecurities
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