Parkson’s FY16 results below expectations
KUCHING: Parkson Holdings Bhd’s (Parkson) financial year 2016 (FY16) results have disappointed analysts, coming in below expectations.
In a filing on Bursa Malaysia, Parkson noted that for the financial year period ended June 30, 2016 (FYE16), the group’s retailing division registered a revenue growth of five per cent to RM3,808 million and reported an operating loss of RM80 million.
According to Affin Hwang Investment Bank Bhd ( Affin Hwang), Parkson’s core net loss of RM93.6 million for FY16 came largely below its and consensus expectations.
As for the research arm of Kenanga Investment Bank Bhd ( Kenanga Research), it noted that Parkson’s first 12 months of 2016 (12M16) core loss after tax and minority interest (LATAMI) of RM105.6 million results also came in below its net loss forecast of RM23 million and consensus RM54 million full-year net profit forecasts.
On the outlook for the group, Kenanga Research highlighted that there are plans to close FMI Centre ( Myanmar), where the store is located, for re-development and the impending closure has affected sales.
“However, the landlord has not confirmed on the timing for the re-development,” it said.
Looking ahead, Kenanga Research expected Parkson to continue facing a tough operating environment on the back of weak consumer sentiment due to the economic slowdown.
Coupled with the intense com-
However, the landlord has not confirmed on the timing for the re-development.
petition from online shopping and oversupply of retail space, the research arm believed it will take a longer period of time for Parkson to reverse the group’s declining trend in same store sales growth (SSSG).
On another note, Affin Hwang said that the group has actively taken measures to revamp existing stores and upgrade existing brands such as the Korean themed floors in Fahrenheit 88, Malaysia and the opening of a Korean themed outlet in China.
“They are also developing an e-commerce platform for the Chinese market,” it added.
However, the research firm believed these measures will take some time to bear fruit and operations in the group’s key markets will remain challenging in the near-term.
Thus, Affin Hwang modified its earnings forecast to seven per cent for FY17-18E and introduced its FY19E numbers by assuming some cost efficiencies will start to kick in as each year passes.
The research firm rolled forward its valuation to 2017 and maintained its ‘sell’ call on the stock with a lower target price of RM0.67 per share from RM0.75 per share.
“Key upside risks include a sharp rebound in regional consumer discretionary spending and lower than expected operating costs,” it said.
Meanwhile, Kenanga Research downgraded its FY17E net profit by eight per cent to take into account higher start-up losses and lower same-stores-sales growth.
By the same token, the research arm’s target price was reduced from RM0.76 per share to RM0.70 per share as it imputed lowered target prices for both Parkson’s listed operating units (Hong Kong listed Parkson Retail Group Limited and Singapore listed Parkson Retail Asia Limited).
All in, Kenanga Research reiterated ‘underperform’ on the stock.
Kenanga Research