PublicInvest Research retains Neutral on Parkson

Parkson Retail Group mall in China

KUALA LUMPUR: PublicInvest Research is retaining its Neutral call on Parkson Holdings Bhd (PHB) with an unchanged target price of 72 sen, based on 14 times of its earnings per share for the FY17.

The research house said on Wednesday PHB which owns 54.67% of Parkson Retail Group (PRG), disposed of its 100% interest Beijing Huadesheng Property Management Co., Ltd to Shenzhen Qianhai Tulan Investment Centre (LLP) and Shanghai Changkun Investment Management Co Ltd. 

Following the disposal, the group’s earnings are expected to increase by RM300mil or 28 sen per share, while its net assets on a proforma basis, will be higher by RM300mil (29 sen per share). 

“Pending further clarity of this transaction and also an EGM for shareholders’ approval, our Neutral call and TP remains unchanged at 72 sen, based on 14 times multiple of our FY17F EPS. With the relevant approvals, transaction is expected to be completed by FYE June 30, 2017,” it said.
 
PublicInvest Research said the department store operation located at Qi Sheng Middle Street, Chaoyang District, Beiing has been losss-making since opening in December 2010. 

Due to the challenging operating environment, the directors of PRG saw the disposal as an opportunity to unlock the value of the disposal subsidiary at an attractive price. 

The disposal will also see the group to cease any investment resources to a loss-making operation, with the proceeds to improve the financial position of the group. 

PRG estimated that the net proceeds will be approximately 1.9bil  renminbi. The group will use these proceeds to enhance and expand its fashion and F&B brands, while exploring new business investment opportunities to expand the group’s revenue streams. 

China to recap for FY16 reported an operating loss of -RM90.7mil, primarily due to higher costs from its new business ventures and new stores in this ramp-up period. 

PublicInvest Research pointed out prospects in the region have remained challenging, in view of weak spending and consumption pattern coupled with stiff competition, which also comes from rapid development of e-commerce platforms. 

Parkson is also stepping up its efforts to keep relevant, having launched a new mobile shopping application, Parkson Plaza in June to leverage on digital platforms in enhancing customers’ shopping experiences.