We attended Parkson Retail Asia’s (PRA) 2QFY15 Results Briefing on 9 th February.

Key Takeaways:

Stable revenue but declining PBT – 2QFY15 revenue was marginally unchanged while PBT fell 19.7%. PBT fell due to 3 reasons: 1) Slow down of same-store-sales growth in Malaysia and Vietnam, 2) Losses from new stores, and 3) Accrued one-off loss due to the closure of Landmark-Keangnam store in Hanoi, Vietnam.

Prudent action regarding Hanoi store closure – Management has set aside S$2.3m in provision for the potential write down of its Landmark-Keangnam store in Hanoi, Vietnam. However, a silver lining remains as it’s in talks with the landlord to possibly reopen the store. The closure occurred as Management felt the initial fixed rental rate was too high and had sought to switch to a variable rental structure but was rejected.

Less-than-rosy Malaysia outlook – Management shared 2 potential factors impacting Malaysia: 1) Poor consumer confidence as seen by the downturn in Malaysia’s Consumer Sentiment Index from 3Q2014 to 4Q2014, and 2) Fewer China tourists (down 11.2% for the 10 months ended Oct-14) owing to recent negative press on the Malaysian Airlines industry. China tourists are the third largest demographic of Malaysia’s overseas tourist arrivals.

Stronger-than-normal FY15 store growth in Malaysia expected – Normally, PRA looks to build 2 new stores per year in Malaysia. In FY15, it’s looking to open a total of 4 new stores (2 have commenced operations). Attractive factors of the stores, such as good locations, were the reason for the higher-than-normal increase in new stores. Management shared that an enlarged store count would enable PRA to catch an upturn in the economy.

Delay of 2 new store openings – The opening of Manado Town Square and Balikpapan Supermal in Indonesia were originally indicated to open in FY15. Their openings have been shifted to FY16 due to unforeseen delays. Their total approximate gross floor area (GFA) is 15,982 sqm (~11.8% of PRA’s current GFA in Indonesia).

Investment Actions

No stock rating or price target provided, as we do not have coverage on PRA.

Source: Phillip Securities Research - 11 Feb 2015