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Flash Note – Parkson (REDUCE, maintain) - PRG FY12: Within our expectation but below consensus




Affin Hwang Investment Bank Bhd


24 Feb 2013





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PRG’s FY12 core net profit plunged 24% to RMB850.8m Last Friday, Parkson Holding’s (PHB) 51.5%-owned unit Parkson Retail Group (PRG) reported its FY12 financial results. Gross sales proceeds (GSP) and revenue grew by +4.8% and +4.2% yoy to RMB17.2bn and RMB4.5bn respectively, driven by +4.7% increase in consessionaire sales and +4.4% growth in total merchandise and direct sales. Notwithstanding the healthy growth in PRG’s GSP and revenue, FY12’s same-store-sales (SSS) growth of +0.4% was unexciting and is below management’s earlier guidance of +2% growth. We attribute this to the weaker consumer sentiment in China and hence on discretionary spending coupled with the stiffer-than-expected competition faced by PRG. Taken together with the overall increase in: 1) operating expenses (yoy: +12.4%), 2) staff cost (yoy: +28.5%) and 3) rental expenses (yoy: +34.8%), PRG’s EBIT margin contracted sharply by -10%-points to 24.7%. Consequently, PRG’s FY12 core net profit fell by -24% to RMB850.8m. Results were within our expectation but below street’s estimates, accounting for 96% of our and only 79% of street’s full year projections.

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