Thursday, September 10, 2015

Parkson Retail Asia - Update

I have not vested interest, and I have explained why I sold here

Some of the reasons and assumptions I had are now clarified. Since I blogged about this before, I feel responsible to give an update and my view.

Reasons to sell had become reality.

1) Ringgit did depreciate quite badly
2) While credit rating did not take a hit, 1 MDB did turn for the worse

As for the Hanoi Mall, some of the assumptions turn out to be too pessimistic. See here

I assume 27 mio of rental compensation for a year, and perhaps 3 years of compensation to be given to landlord. In the Q4 results, the set aside 64 mio for the remaining 7 years lease, but claim that they will contest the claim for compensation if any. They also did a 8 mio impairment for Vietnam operations. Take out these impairment, PRA would almost break even.

Operation wise, business is still generating steady FCF (Not taking into accounts the impairment)

As we know, all business are good at a certain price, and this is not a business going to the dogs, but many assumptions I had for the business, no longer hold true except that it is quite a cash generating business.

One assumption I had was Gestation period of new stores to break even is 1 year.

This is not true. Myanmar's stores reported ramped up sales and it is coming to 2 years of operation, but it is still loss making,

Indonesia new stores' losses is volatile. Q4 Indonesia new stores losses actually increase from Q3 but there are no new stores opening for 3 quarters in Indonesia already. I find it hard to comprehend their quarter reports effectively.

Next, I assume they will slow down their expansion. There is no such announcements yet.

Another announcement that I frown on is the appointment of a 26 years old daughter of chairman as the CEO. I have nothing against family business, but according to the announcements, she joined the company about 3 years ago, and at the age of 23, I assumed she just graduated, I thought there should be some trial of her competency as senior staff of some market or branch first.

Compare this with Wee Ee Cheong, son of Wee CHo Yaw (FOunder of UOB)

"Mr Wee, 62, was appointed to the Board on 3 January 1990 and last re-elected as Director on 24 April 2015. Mr Wee joined UOB in 1979 and served as Deputy Chairman and President of the Bank from 2000 to 2007. On 27 April 2007, he assumed the position of Chief Executive Officer. A non-independent and executive director, he is a member of the Executive and Board Risk Management Committees."

He also joined UOB at a young age of 26 but only as a credit officer.He was made deputy Chairman only on 2000, 21 years later. As for CEO who runs the company on a day to day basis, he only assumed the post of 2007. His earliest appointment I could find was in 1988, where "he served as an Executive Director of United International Securities Ltd." That was already 10 years of slog, even with his vantage background. 

Its off my radar now. Not going to look at it unless it is closer to 20 cents.


  1. Hi Mike

    Congrats, for having the discipline to cut loss at 10% when you spot things are not going well. It could have been much worse if you hold on to it.

    This shows you have been pretty sharp in your analysis and assumption.

  2. Hi solace,

    Where have u been? Have been quite a while, only recently I saw you dropping by Ak. Business big recently? LOL.

    U gave me too much credit la. I can only say the now infamous words "Heng ah". I got my assumptions wrong on sembcorp industries and now blue black ... Lol

    Hope I get the longer term assumptions right ...

  3. Hi Mike,

    Business big? Haha, most likely a case of spending too much time at work and settling house matters.

    Actually, you are not alone in holding Sembcorp. I could not have predict oil price getting weaker when it is already weak haha. Once again, it taught me the importance of position sizing.

    I am too concern too. I believe I have vested in a market leader and the current dividend while not great, still beats FD and SSB lah. It might be a long wait for recovery.

    1. Yea Solace,

      Tonight is my "last carefree night", after tonight I will be back into the thick and action of work. But i do feel recharged and hope I last another 12 weeks

      I also hope I level up quickly in my work. I have more worries about my kids' results and m lack of value adding in my work than sembcorp LOL