Parkson Holdings Bhd (Oct 28, RM5.65)
Maintain buy call with lower target price of RM6.55 from RM7.45: Parkson Retail Asia Limited (PRA) is slated for listing on the Main Board of Singapore Exchange (SGX) on Thursday.
The IPO will involve a total offering of 147 million PRA shares comprising 80 million new shares and 67 million vendor shares (with an option to add 22 million vendor shares for over-allotment) from Parkson Holdings (PHB) and PT Mitra Samaya (MS) at S$0.94 per share.
This will raise S$138 million (RM341 million), lower than the initially speculated S$300 million to S$500 million possibly due to the prevailing market uncertainties. The IPO price values PRA at S$636 million based on an enlarged share base of 677 million, implying 13 times S$48 million earnings in FY12F.
Post-listing of PRA, PHB’s stake will be diluted to 67.6% (from 90.1%) assuming the over-allotment option is exercised, prompting us to trim our FY12F earnings by 4.9% and FY13F by 5.3% to account for the earnings leakage to minority interests and incremental interest income from the IPO proceeds of RM185 million.
We are maintaining our FY12F/FY13F net profit for PRA at S$48 million and S$61 million.
This translates to a two-year compound annual growth rate of 28%, backed by healthy same store sales growth of 5% to 20% and the addition of six new stores per year over the next one or two years.
We cut our target price for PHB to RM6.55 (from RM7.45) after imputing: (i) PHB’s 51.5%- owned Hong Kong-listed subsidiary Parkson Retail Group Ltd’s (PRG) new TP of HK$11.46 (from HK$13.15); and (ii) reduced stake of 67.6% (from 90.1%) in PRA.
We have also assumed a 15% holding company discount for both listed subsidiaries, which is narrower than the 20% discount previously attached to PRG given PHB’s new corporate structure of having double exposure to two listed subsidiaries now.
We keep our sum-of-parts valuation of RM2.2 billion (RM3.25 per share or S$1.33 per share) for PRA, valuing it at 16.5 times CY12F earnings. Our valuation implies a 41% upside potential to PRA’s IPO price of S$0.94. Based on current market capitalisation of PHB and its share of PRG’s market capitalisation, PRA is valued at only RM0.37 per share. — Hwang DBS Vickers Research, Oct 28
This article appeared in The Edge Financial Daily, October 31, 2011.
Maintain buy call with lower target price of RM6.55 from RM7.45: Parkson Retail Asia Limited (PRA) is slated for listing on the Main Board of Singapore Exchange (SGX) on Thursday.
The IPO will involve a total offering of 147 million PRA shares comprising 80 million new shares and 67 million vendor shares (with an option to add 22 million vendor shares for over-allotment) from Parkson Holdings (PHB) and PT Mitra Samaya (MS) at S$0.94 per share.
This will raise S$138 million (RM341 million), lower than the initially speculated S$300 million to S$500 million possibly due to the prevailing market uncertainties. The IPO price values PRA at S$636 million based on an enlarged share base of 677 million, implying 13 times S$48 million earnings in FY12F.
Post-listing of PRA, PHB’s stake will be diluted to 67.6% (from 90.1%) assuming the over-allotment option is exercised, prompting us to trim our FY12F earnings by 4.9% and FY13F by 5.3% to account for the earnings leakage to minority interests and incremental interest income from the IPO proceeds of RM185 million.
We are maintaining our FY12F/FY13F net profit for PRA at S$48 million and S$61 million.
This translates to a two-year compound annual growth rate of 28%, backed by healthy same store sales growth of 5% to 20% and the addition of six new stores per year over the next one or two years.
We cut our target price for PHB to RM6.55 (from RM7.45) after imputing: (i) PHB’s 51.5%- owned Hong Kong-listed subsidiary Parkson Retail Group Ltd’s (PRG) new TP of HK$11.46 (from HK$13.15); and (ii) reduced stake of 67.6% (from 90.1%) in PRA.
We have also assumed a 15% holding company discount for both listed subsidiaries, which is narrower than the 20% discount previously attached to PRG given PHB’s new corporate structure of having double exposure to two listed subsidiaries now.
We keep our sum-of-parts valuation of RM2.2 billion (RM3.25 per share or S$1.33 per share) for PRA, valuing it at 16.5 times CY12F earnings. Our valuation implies a 41% upside potential to PRA’s IPO price of S$0.94. Based on current market capitalisation of PHB and its share of PRG’s market capitalisation, PRA is valued at only RM0.37 per share. — Hwang DBS Vickers Research, Oct 28
This article appeared in The Edge Financial Daily, October 31, 2011.
