For QE30/9/2014, Parkson's net profit dropped by 25% q-o-q or 34% y-o-y to RM20 million while revenue inched up 4% q-o-q or 2% y-o-y to RM848 million. Revenue increased q-o-q due Muslim's festive season in Malaysia & Indonesia. Pre-tax profit dropped due to the challenging retailing operations in China, which is the result of the proliferation of e-commerce operation & weak discretionary spending. This has a negative impact on Parkson China's SSS growth.
Table: Parkson's last 8 quarterly results
Chart 1: Parkson's last 31 quarterly results
Valuation
Parkson (closed at RM2.48 yesterday) is now trading at a trailing PE of 20 times (based on last 4 quarters' EPS of 12.1 sen). If you expect the Chinese economy to recover in the near term, then we can expect Parkson's results to improve, leading to the rollback of the current high PE. Without an increased earning, Parkson's valuation is demanding.
Technical Outlook
Parkson has been in a downtrend since 2008. It is struggling to hang onto the support of RM2.50. If that support failed, then its next support is at the horizontal line of RM2.20 and then the psychological RM2.00 mark. Its immediate resistance is at RM3.00.
Chart 2: Parkson's monthly chart as at Nov 24, 2014 (Source: Share Investor)
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 is 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.
Alex,
ReplyDeleteThe impact on Parkson is due to lifestyle change. I believe a reverse is unlikely to happen naturally.
My colleagues in China accumulate their purchase and then purchase online, especially when discount is available.
The recent spike in Ali Baba online order are not new purchase, but rather effect of cannibalization from departmental store.
To survive, Parkson will need to recreate itself, identifying new opportunities. The war between Parkson and Online store has already been fought, and lost. The situation will only get worse.
Parkson has been talking about new direction but nothing new to me have happened. If Parkson progress along this path, we can written it off as a gone case.
Hi Big Sea,
ReplyDeleteThank you for your sharing. The trend of shopping is definitely changing. A good strategy will be to have an online business running parallel to the brick-and-mortar business.
We will see whether the latter will survive when the Chinese economy recovers from its current slowdown.
Alex,
ReplyDeleteOn the other hand, I do agree that evergreen worth taking a look.
Mieco, hevea evergreen all posted stable result. A very good sign.