Parkson Holdings Bhd (Nov 3, RM 5.58)
Maintain buy with lower target price RM7.15 from RM7.97: Parkson Retail Asia (PRA) was listed on the Main Board of the Singapore Stock Exchange (SGX) yesterday.
Details of the IPO are as follows: (i) Issuance of 80 million new PRA shares and 67 million existing PRA shares under the offer for sale programme (total: 147 million shares) at a price of S$0.94 per share. The over-allotment option of 22 million shares has also been subscribed/purchased, bringing the total number of offered PRA shares to 169 million; (ii) Overall, the IPO will raise S$158.9 million (RM391.2 million), while the offer price values PRA at S$636.7 million (based on an enlarged share base of 677.3 million shares). We estimate that Parkson Holdings Bhd’s (PHB) share of the IPO proceeds amount to S$77.5 million.
Our calculations imply that prior to the listing, the market was pricing PRA at a mere 6.3 times CY12 price earnings ratio, far below PHB’s CY12 PER of 13.5 times and and Parkson Retail Group’s (PRG) 17.2 times.
Based on: (i) our CY12 net profit forecast of S$44 million; and (ii) PRA’s IPO price of S$0.94 per share, PRA is valued at a much higher CY12 PER of 14.4 times. This is, in our opinion, a fairer valuation given PRA’s exposure to the growing regional consumer market. In 2012, PRA will be launching two new stores in Vietnam, three in Malaysia and two to three new stores in Indonesia.
We ascribe a PER target of 16 times for PRA, representing a 19% premium to PHB’s CY12 PER of 13.5 times. We believe the premium is justified, given PRA’s regional presence and strong Asean growth opportunities, particularly within Indonesia and Vietnam and the present investment holding company status of PHB.
Coupled with: (i) the stake dilution in PRA from 90.1% to 67%; (ii) a lower PER target of 23 times (previously, 25 times) for PRG, to reflect the weaker global market sentiment; (iii) a higher holding company discount of 20% (previously, 10%) and; (iv) raising our net cash balance, our sum-of-parts-based target price of RM7.97 is lowered to RM7.15.
Despite the downgrade, there is still 30% upside to the current share price of RM5.50. Maintain “buy” on PHB, for its exposure to both PRG and PRA. — Affin Investment Research, Nov 3
This article appeared in The Edge Financial Daily, November 4, 2011.
Maintain buy with lower target price RM7.15 from RM7.97: Parkson Retail Asia (PRA) was listed on the Main Board of the Singapore Stock Exchange (SGX) yesterday.
Details of the IPO are as follows: (i) Issuance of 80 million new PRA shares and 67 million existing PRA shares under the offer for sale programme (total: 147 million shares) at a price of S$0.94 per share. The over-allotment option of 22 million shares has also been subscribed/purchased, bringing the total number of offered PRA shares to 169 million; (ii) Overall, the IPO will raise S$158.9 million (RM391.2 million), while the offer price values PRA at S$636.7 million (based on an enlarged share base of 677.3 million shares). We estimate that Parkson Holdings Bhd’s (PHB) share of the IPO proceeds amount to S$77.5 million.
Our calculations imply that prior to the listing, the market was pricing PRA at a mere 6.3 times CY12 price earnings ratio, far below PHB’s CY12 PER of 13.5 times and and Parkson Retail Group’s (PRG) 17.2 times.
Based on: (i) our CY12 net profit forecast of S$44 million; and (ii) PRA’s IPO price of S$0.94 per share, PRA is valued at a much higher CY12 PER of 14.4 times. This is, in our opinion, a fairer valuation given PRA’s exposure to the growing regional consumer market. In 2012, PRA will be launching two new stores in Vietnam, three in Malaysia and two to three new stores in Indonesia.
We ascribe a PER target of 16 times for PRA, representing a 19% premium to PHB’s CY12 PER of 13.5 times. We believe the premium is justified, given PRA’s regional presence and strong Asean growth opportunities, particularly within Indonesia and Vietnam and the present investment holding company status of PHB.
Coupled with: (i) the stake dilution in PRA from 90.1% to 67%; (ii) a lower PER target of 23 times (previously, 25 times) for PRG, to reflect the weaker global market sentiment; (iii) a higher holding company discount of 20% (previously, 10%) and; (iv) raising our net cash balance, our sum-of-parts-based target price of RM7.97 is lowered to RM7.15.
Despite the downgrade, there is still 30% upside to the current share price of RM5.50. Maintain “buy” on PHB, for its exposure to both PRG and PRA. — Affin Investment Research, Nov 3
This article appeared in The Edge Financial Daily, November 4, 2011.
