Parkson- a trading BUY

Parkson has risen nicely since bottoming out in March. For QE31/3/2009 (announced in May), its turnover increased by 2.7% q-o-q or 10.8% y-o-y to RM703 million. Net profit dropped by 27.1% q-o-q or 74.3% y-o-y to RM75.9 million. The main reason for the drop is because of the following:
1) A one-off gain of RM231.6 million arising from the placement of 1.44% Parkson Retail shares in QE31/3/2008; and
2) A one-off gain of RM32.5 million arising from dilution of interests in Nanning Parkson and Tianjin Parkson in QE31/12/2008.

Over the past 4 quarters, we can see that Parkson's turnover has been rising steadily since making a low of RM514.6 million in QE30/6/2008 (due to the absence of major festivities). In addition, its operating profit margin has improved over the same period from 25.7% (QE30/6/2008) to 24.8% (QE30/9/2008) to 27.7% (QE31/12/2008) to 28.9% (QE31/3/2009). I expect a small drop in Parkson's turnover for QE30/6/2009 sue to the absence of major festivities, but offset by increased consumer spending (resulting from improved sentiment).




Chart 1: Parkson's last 8 quarterly results

In term of valuation, Parkson (closed at RM5.60 at the end of the morning session) is not cheap as it trades at a trailing PE of 19.6 times (based on last 4 quarters' EPS totaling 28.5 sen). I am revisiting this stock after my BUY call in March because the stock has broken above an ascending triangle, with breakout at RM5.20. Its next resistance levels are at RM6.20 & RM7.00, while the support levels are at RM5.20 & RM4.80.


Chart 2: Parkson's daily chart as at July 23, 2009_12.30noon (Source: Quickchart)


Chart 3: Parkson's weekly chart as at July 22, 2009 (Source: Quickchart)

Based on the above, Parkson could be a good trading BUY.