PHB’s 3QFY13 revenue increased 0.3% QoQ to RM932.8m (+1.6% YoY) coupled with improved earnings from RM74.2m to RM76.9m QoQ but declined -24.9% YoY. Historically the highest contributing quarter, PHB’s YTD results have not met our estimates. In the near-term we continue to see its earnings to be dragged down by China’s underperformance. We are downgrading our recommendation to Neutral with a rolled-over TP of RM4.17 based on our FY14F estimates. In our recent management meeting we do believe the group is taking the necessary measures to revive its China performance through i.) scaling back on store openings, ii.) focus on improving current stores and iii.) expand to 2nd and 3rd tier cities that have limited competition.
3QFY13 results. PHB’s revenue improved marginally YoY (+1.6%) due to new stores’ contribution combined with its current operations. We assume in the near-term as Parkson Retail Group (China – 71% revenue contribution to PHB) experiences weaker demand (+1% YoY) coupled with rising costs mainly from higher rental expenses (+31% YoY) and staff costs (+25% YoY), the recovery could be slower than expected.
Same-store-sales growth (SSSG). 3QFY13 SSSG growth for Malaysia (+8.6%), Indonesia (+1.2%), China (-2%) and Vietnam (+9.9%) continue to be affected by weaker consumption coupled with respective country factors. For Malaysia and Vietnam, the reported quarter benefited from festivities due to the shift in sales to 18 days later (FY13) of the Chinese Lunar New Year and Tet calendars compared to FY12. The lower than expected SSSG for Indonesia was attributed to lower sales of the Plaza Semanggi, Jakarta store from nearby competition which we understand is a short-term impact. Management aims to improve SSSG through i.) targeted promotional activities including improved productivity of floor space, ii.) refurbish and upgrade existing stores and brands, iii.) improve operating efficiency via cost rationalization and iv.) Merger and acquisition opportunities for retail and/or property.
This is the comment from most of the financial analysts recently. They suggested for "HOLD" and "SELL" call for Parkson.
But, What Master Fong Siling sees is different!
REASONS:
- Downturn is always the best time to catch the share at discounted price!
- EPS drops to 29 cents , but PE around 11 for BIG BLUE CAP! it is relatively cheap compare to other blue chip!
- Strong brand!
- Currently on expansion mode to expand business in CHINA, S.E.A ( foresee long term EPS to return soon! )
- Heavy share buy back by company!
- At current year low of RM 3.8! it is definitely a GEm!
