Thursday, May 14, 2015

Parkson Retail Asia

Parkson Retail Asia report its earnings.

I expect some SSSG for Malaysia due to the buying to beat the GST of April. And it did show up.

I was hoping for another special intern dividends, but nope.

I did a tracking of the new stores and same stores comparison.

Since December 2013, Parkson has been aggressively adding Indonesia mall space of about 24K sqm, and the loss from new stores in Indonesia spike corresponding in the following 2 quarters. By 31 June, PRA added another 26 K sqm of retail space, but losses from Indonesia operation is not increasing but continued to be reduced. This quarter loss of Indonesia operation is only 1.7 mio. Thus the 1 year gestation period for new malls stand for Indonesia and going forward, since no more new malls from Indonesia, Indonesia contribution will continue to improve.

Malaysia retail space is increasing too, starting from last quarter. So, while we can expect some harvest, we will most probably not see much improvement in overall results since they are kicking starting about 45 k of retail space since last 2 quarters, the losses from Malaysia operation should increase.

However, overall profits while still falling from last year, should stabilized while PRA continued its expansion in SEA.

PRA is expanding at a time when Indonesia and Malaysian Currency are weak. It is expanding at a time when consumer sentiments are weak in Malaysia.

Yet the business is still profitable, and FCF generating.

I think It is easy to fall into yearly analysis of PRA and condemned it to be a loser given it has been experiencing lowering topline and bottomline since 2012. This year will be the fourth year of decline.

But if we look at it in totality, PRA does show some moat in its business.

SSSG is negative at a single digit rate during a hostile external environment of weak currency and poor consumer sentiments.

I believe I will still continue to hold on to my small position and might accumulate if prices go lower.

Do note that PRA need not keep expanding, they have the option to slow down their expansion in 2 years time.


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