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We recently met Parkson Holdings Bhd (Parkson) management to get the latest update on the company. Below is the information we gathered from the meeting:
Strong SSS growth recorded
. Parkson recorded a strong SSS (same store sales) growth in FY06/10 with +11% recorded in Malaysia, +26.9% Vietnam, and 11.3% China.
. The strong SSS growth was mainly driven by its aggressive expansion strategy throughout the year. 8 new stores were opened in Kota Bharu, Kota Kinabalu, and Kluang
(Malaysia), Changsu, Lanzhou, Shijiazhuang, and Shaoxing (China), and Ho Chi Min City (Vietnam).
More expansion to come
.The management is committed to continue with its aggressive expansion plan in the future. Parkson expects to open at least 5 new stores in China and 1-2 new stores in
Malaysia and Vietnam in the immediate term.
. So far, Parkson has 35 stores in Malaysia, 6 in Vietnam, and 46 in China. Note that Parkson’s operation in China is run by the Parkson Retail Group (PRG) with 51.5% stake
owned by Parkson. In the future, Parkson will transfer all its direct owned stores for PRG to operate. For that, Parkson expects to spend more than RM200mn as capex.
New market penetration
. Parkson’s management reaffirmed that Parkson’s Cambodia will start its operation in 2012 in addition to seriously looking into the Indonesia’s market.
. The penetration strategy into highly populated nation will bode well for the group as earnings growth by the company is primarily driven by new stores opening.
. We are positive on this as Indonesia and Cambodia have a combined population in excess of 200mn people or at least 7x bigger than Malaysia.
To focus on concessionaire sales
. Concessionaire sales contribute about 73% of the annual revenue in Malaysia with 90% in China and 92% in Vietnam.
. Moving forward, Parkson will focus to increase its revenue contribution by concessionaire sales which basically include the commission that come from the sales of tenant in Parkson stores.
30% dividend payout
. Parkson does not have a formal dividend policy but has been consistently paying dividend to its shareholders. Parkson expects to pay about 30% of net profit as dividend in the future that translates into 1.6% dividend yield (FY11).
Valuation
We have made some adjustment on our earnings forecast in tandem with the aggressive expansion plan by Parkson. As result, FY11 earnings have been bumped up by 16% to RM369mn. Hence, we upgrade our call to a BUY from Outperform with a target price of RM7.57 based on SOP valuation. Total return is at a sterling 27.8% including 1.6% dividend yield.
Strong SSS growth recorded
. Parkson recorded a strong SSS (same store sales) growth in FY06/10 with +11% recorded in Malaysia, +26.9% Vietnam, and 11.3% China.
. The strong SSS growth was mainly driven by its aggressive expansion strategy throughout the year. 8 new stores were opened in Kota Bharu, Kota Kinabalu, and Kluang
(Malaysia), Changsu, Lanzhou, Shijiazhuang, and Shaoxing (China), and Ho Chi Min City (Vietnam).
More expansion to come
.The management is committed to continue with its aggressive expansion plan in the future. Parkson expects to open at least 5 new stores in China and 1-2 new stores in
Malaysia and Vietnam in the immediate term.
. So far, Parkson has 35 stores in Malaysia, 6 in Vietnam, and 46 in China. Note that Parkson’s operation in China is run by the Parkson Retail Group (PRG) with 51.5% stake
owned by Parkson. In the future, Parkson will transfer all its direct owned stores for PRG to operate. For that, Parkson expects to spend more than RM200mn as capex.
New market penetration
. Parkson’s management reaffirmed that Parkson’s Cambodia will start its operation in 2012 in addition to seriously looking into the Indonesia’s market.
. The penetration strategy into highly populated nation will bode well for the group as earnings growth by the company is primarily driven by new stores opening.
. We are positive on this as Indonesia and Cambodia have a combined population in excess of 200mn people or at least 7x bigger than Malaysia.
To focus on concessionaire sales
. Concessionaire sales contribute about 73% of the annual revenue in Malaysia with 90% in China and 92% in Vietnam.
. Moving forward, Parkson will focus to increase its revenue contribution by concessionaire sales which basically include the commission that come from the sales of tenant in Parkson stores.
30% dividend payout
. Parkson does not have a formal dividend policy but has been consistently paying dividend to its shareholders. Parkson expects to pay about 30% of net profit as dividend in the future that translates into 1.6% dividend yield (FY11).
Valuation
We have made some adjustment on our earnings forecast in tandem with the aggressive expansion plan by Parkson. As result, FY11 earnings have been bumped up by 16% to RM369mn. Hence, we upgrade our call to a BUY from Outperform with a target price of RM7.57 based on SOP valuation. Total return is at a sterling 27.8% including 1.6% dividend yield.
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