KUALA LUMPUR (July 16): Parkson Holdings Bhd is expected to pocket S$228.5 million (RM641.42 million) cash should the retail group’s proposal to sell its entire 67.6% stake in Parkson Retail Asia Ltd (PRA) in Singapore to another subsidiary, Parkson Retail Group Ltd (PRG) go through.

In a filing with Bursa Malaysia yesterday, the retail group said its wholly-owned unit East Crest International Ltd, Parkson, Oroleon (Hong Kong) Ltd and PRG entered into a sale and purchase agreement for the proposed disposal yesterday.

Parkson said the PRA stake is now being held by East Crest. The stake, comprising 457.99 million shares, will be sold to Oroleon, a wholly-owned unit of PRG. The shares are to be sold at S$0.499 each, a slight 6.2% premium over Tuesday’s closing price of S$0.47 on the Singapore stock exchange.

The consideration for the stake sale will be satisfied in cash by Oroleon. The stake sale will see PRA become a subsidiary of PRG, in which Parkson holds a 53.1% stake. Subsequently, Parkson’s effective equity interest in PRA will be diluted from 67.6% to 35.9%, which would result in lower earnings contribution going forward.

Parkson proposes to utilise the cash proceeds from the proposed disposal for business expansion, new investment opportunities and/or working capital.

As at March 31, PRG has 1.66 billion yuan (RM1.01 billion) in cash and equivalents. This proposal, if effected, will presumably use up a large portion of its cash pile.

The proposed disposal is intended to consolidate the retail business of PRA, which has a presence in Southeast Asia, with that of PRG, which operates a similar business in China, it said.

As PRA has an established platform in Southeast Asia, the acquisition would allow PRG to establish an immediate foothold in the region, Parkson said. Upon completion of the acquisition Hong Kong’s PRG would be a leading Pan-Asian department store retailer, it added.

“The consideration was determined after arm’s length negotiations between East Crest and Oroleon on normal commercial terms after taking into consideration, inter alia, the current trading share price of PRA shares,” it said.

It also represents a price-to-book  (P/B) ratio of approximately 1.56 times based on the unaudited consolidated net assets (NA) per share of PRA as at March 31, 2015 of approximately S$0.32.

“The said P/B ratio is within the range of the P/B ratio of the listed retail companies in the Southeast Asia region and the price-earnings ratio (PER) of approximately 11.88 times is based on the trailing earnings per share (EPS) of PRA for the 12 months ended March 31, 2015, of approximately S$0.042. The said PER is within the range of the PER of the listed retail companies in the Southeast Asia region,” it added.

The proposed disposal is conditional upon the relevant approvals being obtained, including from shareholders of Parkson and PRG at an extraordinary general meeting to be convened later.

PRA, through its subsidiaries, has an extensive network of 67 stores (including one supermarket) as at the last practicable date prior to the announcement, spanning cities in Malaysia, Vietnam, Indonesia and Myanmar, said Parkson.

Barring any unforeseen circumstances, Parkson said the proposed disposal is expected to be completed by the fourth quarter of this year.

Parkson closed down six sen or 4.32% at RM1.33 yesterday for a market capitalisation of RM1.45 billion.

This article first appeared in The Edge Financial Daily, on July 16, 2015.

SHARE
RELATED POSTS
  1. PEPS Malaysia inks MOU with Singapore Estate Agents Association for real estate knowledge exchange and networking opportunities
  2. How essential oils can refresh and elevate your home in the Tropics
  3. Pintaras Jaya bags piling contracts worth RM170mil in Singapore