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Analyst Research Report Snapshot


Parkson - China operations is still not well




Affin Hwang Investment Bank Bhd


15 May 2013





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PRG’s 1QFY13 core net profit dipped -27% yoy Yesterday, Parkson Holdings’s (PHB) 51.5%-owned unit Parkson Retail Group (PRG) registered a dissapointing 1QFY13 financial results. Same-store-sales (SSS) growth contracted -2.8%, falling short of our and management’s expectations. While revenue grew by a marginal +0.4% yoy to RMB1.45bn, core net profit plunged by -27.4% yoy to RMB227m. We attribute this to: 1) the weaker-than-expected operating environment in China; 2) stiffer-than-expected competition which had also resulted to a -0.7%-point drop in merchandise margins to 17.3%; and 3) higher operating cost due to higher promotional activities in conjunction with the Chinese New Year sales. On the same token, PRG’s 1QFY13 EBIT margin contracted by -7%-points yoy to 21%. (Note that Fashion & Apparel category made up of c.47.2% of total merchandise sales, followed by Cosmetics & Accesorries caterogy with c.42.1%, Households & Electrical category at 4.4% and 6.3% from Groceries & Perishables goods) Results were within expectations, accounting for 25% of both our and street FY13 full year forecasts.

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