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Company Update – Parkson (REDUCE, maintain) - No sign of recovery from PRG




Affin Hwang Investment Bank Bhd


22 Jan 2014





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Cutting TP further on lower PE multiple We cut our RNAV-based derived TP for Parkson (PHB) from RM3.38 to RM2.80 (our third downgrade since Jan 2013) based on: 1) a lower cash holdings (from RM250m to RM230m), as the group had utilize RM20m to pay the deposits for its Cambodia malls and share buybacks; and 2) a lower target PER of 13x (16x previously) CY14 EPS for its 51.5%-owned China-based operations. We pegged PHB’s China operation, Parkson Retail Group (PRG) at a lower target PE multiple as there is no sign of a strong recovery in its operations. Nonetheless, the ascribed target PER of 13x is still at a 30% premium to the prevailing industry average PER as we like PRG’s: 1) strong presence in China, spanning a total of 55 shopping malls in the world’s largest country by population (1.36bn people); and 2) huge net cash pile of RMB816m (as at Sept 2013), allowing PRG to carry out store refurbishment, increase product offerings and store expansion activities, albeit at a slower pace.

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