Parkson Retail Asia

Kim Eng on 28 Mar 2012


Background: Parkson Retail Asia (PRA SP) is one of the largest department store operators in ASEAN, with
53 stores in Malaysia and eight each in Vietnam and Indonesia. Most are under the Parkson brand, which
is a highly recognised brand in its operating markets.

Recent IPO at $0.94 per share: PRA was listed on the Singapore Exchange in November last year and is controlled by Parkson Hldg Bhd (PKS MK), which is listed on Bursa Malaysia. Its sister company, Parkson
Retail Group (3368 HK), is listed on the Hong Kong Stock Exchange and operates 52 department stores
in China.


Emerging market play. PRA is envisaged as the ASEAN emerging market arm of Parkson Hldg, with plans to expand its presence in the Indonesian and Vietnamese markets. It is also exploring plans in Thailand, Cambodia and Myanmar. Department stores are highly popular in the emerging markets and experienced operators are able to provide a range of products to suit local conditions.

Asset-light model. PRA rents its space from mall owners and mostly operates department stores whose sizes range from 8,000 sq m to 10,000 sq m. The bulk of its revenue comes from subleases to concessionaire retailers, with about 20% from direct sales. The concessionary model lowers operating risk as cost is borne by retailers. Parkson stores are primarily targeted at the middle-to-upper income segment, with fashion and cosmetics making up more than 80% of sales.

Blazing same store sales growth. Net profit for 1HFY Jun12 grew by 29% YoY to $27m, which was ahead of consensus. The increase was driven by very strong same store sales growth (SSSG) in Malaysia (12%), Vietnam (16%) and Indonesia (10%), testifying to the growing consumption power of emerging markets. Management aims to maintain similar SSSG while rolling out a further 12 stores over the next two years. Consensus estimates are for net profit to grow at 27% CAGR over the next three years.