KUCHING: Parkson Holdings Bhd (Parkson) is set to retain its healthy growth going forward despite facing weak same store sales (SSS) growth from the group’s Vietnam operations.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) in a recent research report, despite the drag on Parkson’s 67.6 per cent-owned subsidiary, Parkson Retail Asia’s (PRA) earnings by its Vietnam operations, the research firm opined that Vietnam’s recovery, although likely to be slow, was forthcoming.
“For the period ending second quarter of the financial year 2013 (2QFY13), PRA reported a 2.2 per cent year-on-year (y-o-y) increment and a cumulative 4.6 per cent y-o-y increment in revenue to S$122.2 million and S$23 million respectively.
“Growth was supported by SSS growth from its Indonesian and Malaysian operations which grew 4.5 per cent y-o-y and 2.8 per cent y-o-y respectively, and 6.7 per cent y-o-y and 4.2 per cent y-o-y respectively on a cumulative basis,” the research firm said.
However, it outlined, PRA showed a decrease of 8.4 per cent y-o-y SSS growth from Vietnam and a drop of 7.4 per cent y-o-y for 2QFY13 and the first half of the FY13 (1HFY13) respectively had capped PRA’s aggregate revenue growth.
It added, “The negative growth in Vietnam was the result of contractionary policies implemented by the Vietnamese government to manage inflation and reduce its trade deficit, which led to slower economic growth in the country.”
In addition, MIDF Research pointed out the group’s Vietnam operations weighed heavier on bottom-line causing a dip.
“PRA’s 1HFY13 profit before tax declined 8.7 per cent y-o-y to S$35.3 million,” it said, adding the the weak performance is attributable to the group’s Vietnam operations which declined 52.5 per cent y-o-y to S$2.1 million.
The most notable drag came from the new store at Landmark 72, Hanoi, which opened its doors to the public in December 2011, the research firm cited.
“HSBC noted that manufacturers have been reducing their stockpiles indicating a cautious sentiment,” the research firm explained further.
Nonetheless, it opined that Vietnam’s economy has a silver lining, adding that there is a possibility for Vietnam’s economy to see some improvement in the next one to two years.
MIDF Research said, despite HSBC’s cautious outlook, “According to its Vietnam manufacturing purchasing managers index, manufacturing production had been increasing in the last three months, with the index rising to 50.1 in January 2013 from 49.3 a month ago from a slight increase in domestic orders.”
On the other hand, the research firm opined that Parkson’s expansion effort could potentially reap benefits for the group while some of the stores are expected to break even and possibly turn profitable by FY14.
As such, MIDF Research pegged the target price at an unchanged RM4.69 per share based on price earnings ratio 2013 multiple of 21-fold with respect to PRA and 20.8-fold with respect to Parkson Retail Group.