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| Parkson Holdings on sustainable track |
| Written by Financial Daily | |||
| Thursday, 16 July 2009 11:55 | |||
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OSK Research said Parkson Holdings’ China unit, which contributes the bulk of the retailer’s earnings, would be the main driver of the group’s performance. The company also has retail business in Vietnam and Malaysia. “Despite the anticipated weaker retail sales in Malaysia, China which contributes 90% of Parkson Holding’s earnings, will ultimately drive the group’s performance. We believe that the performance of higher-end retailers like Parkson tend to be more closely related to movements in the stock and property markets, which recently saw a slight rebound (such as in China), wrote OSK. It expects Parkson Holdings’ net profit in the financial years to June 2009 (FY09) and 2010 to reach RM249.9 million and RM310 million respectively. The FY09 estimates assumed Parkson Holdings’ outlets in China, Vietnam and Malaysia would post same-store sales growth of 8%, 14% and 2.9% respectively. The research house’s forecast is lower than Parkson’s estimates of a 10% expansion in China, and up to 20% and 4% respectively for Vietnam and Malaysia.  Parkson’s expansion is intact. According to OSK, the retailer is expected to open seven new stores across China, Vietnam and Malaysia this year. This will be followed by two outlets in the following two years, one each in Malaysia and Cambodia. OSK said despite weaker consumer sentiments, Parkson Holdings’ expansion was crucial to gain market share, and at the same time, capitalise on cheaper rental rates against an improving economic landscape. Retail sales in China posted at annual growth of 15% in the first five months of 2009, while Vietnam’s retail sector performance in the six months to June improved 22.5%. Meanwhile, the Malaysian fraternity is expected to register a contraction of up to 5% this year, after recording annual sales growth of 6.5% a year earlier. However, OSK foresees potential upside in Parkson Holdings shares. “Parkson Holdings is still trading at a 38% discount to its 51.6%-owned subsidiary Parkson Retail Group Ltd (which is listed on the Hong Kong bourse),” according to the research house which maintained its buy rating for Parkson Holdings, and its target price of RM5.50. Parkson Holdings shares lost 16 sen to end at RM4.94 yesterday. This article appeared in The Edge Financial Daily, July 16, 2009.
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