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Flash Note – Parkson (ADD, maintain) - PRA’s FY06/13: Below expectation




Affin Hwang Investment Bank Bhd


21 Aug 2013





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PRA’s FY06/13 core net profit fell -16.6% to S$38m Yesterday evening, Parkson Holding’s (PHB) 67.6%-owned unit Parkson Retail Asia (PRA) reported its FY06/13 financial results. Gross sales proceeds (GSP) and revenue grew by a moderate +5.2% and +3.2% yoy to S$1.1bn and S$446m respectively. SSS growth for PRA's core Malaysia operations weakened, registering a growth of only +4.5% yoy vis-a-vis 9.2% yoy in FY06/12. The same goes to its Indonesia and Vietnam operations, which also registered slower SSS growth of +5.6% yoy (FY06/12: +9.2%) and -0.7% yoy (FY06/12: +9%) respectively. With the moderating SSS and topline revenue growth, which was offset by the group's higher operating expenses (+5.7% yoy) and higher tax expenses (FY06/13 effective tax rate: 31.6% vs FY06/12's 28.4%), PRA’s FY06/13 net profit fell by -16.6% to S$38m. The main culprit for the strong operating expenses growth were: 1) higher rental costs (+13.5% yoy to S$101m); and 2) higher depreciation charges (+4.5% yoy to S$19.6m) due to the inclusion of new stores opened in FY06/13. We also understand that the group had rolled-out more promotional activities in FY06/13 due to the growing retail competition in Malaysia. As a result, EBIT margin slid by -2.6%-points yoy to 12%. Results were below both our and consensus expectations, accounting for 93% of our and only 80% of consensus FY06/13 forecasts.

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