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Thursday, July 10, 2014

Parkson: A stock for the contrarian

Background

Over the past 2 years, Parkson's share price has been declining (see Chart 1). It is now revisiting the 2009 low of RM2.30-2.50 (go here).


Chart 1: Parkson's weekly chart as at July 9, 2014 (Source: Tradesignum)

If you look at the last 8 quarterly results (in the table below) and the 29 quarterly results (in Chart 2), you will see that Parkson had a bad year in 2013. It bit the bullet in the end of CY2013 by terminating lease contracts of stores with potential closure which resulted in provision for penalty of RM46 million in QE31/12/2013. This has dragged down its earning for that quarter and hopefully will help in driving up its earnings in subsequent quarterly.


Table: Parkson's last 8 quarterly results


Chart 2: Parkson's last 29 quarterly results 


Chart 3: Parkson's last 10 years' results  (Source: Equities Tracker)


Valuation

Parkson (closed at RM2.50 yesterday) is now trading at a trailing PE of 19 times (based on last 4 quarters' EPS of 13.3 sen). If you expect Parkson's results to improve going forward, then the trailing PE is not very meaningful. It maybe more helpful to look at PB ratio and that ratio stood at an attractive 0.9 time.

Conclusion

Despite the poor financial performance for the past 2-3 years & bearish technical outlook, Parkson is a stock worth watching because it has dropped so much. I believe that the RM2.50 level could be a strong support and the base for a bottoming phrase for this stock. If you are a contrarian, you might start to slowly accumulate this stock.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Parkson.

4 comments:

lai said...

Hi Alex,

May oi have your opinion on Bertam?

Thanks

Alex Lu said...

hi lai,

Bertam broke above its large triangle at RM0.80-0.83. It may go RM1.30-1.50.

John Mu said...

Halo Mr alex. May I know about ta enterprise?

Alex Lu said...

Hi John Mu

Based on technical projection, TA may go to RM1.20.