Parkson: Down but not out

Result Update

For QE31/12/2015, Parkson reported a net loss of RM31 million on the back of a revenue of RM1.038 billion. Revenue rose 11% q-o-q due to higher consumer spending during the year end festivities and holiday season. Despite higher revenue, PBT dropped as the preceding quarter number included gain on partial disposal of a former subsidiary amounting to RM136 million. [Note: Parkson's results was announced on Feb 24, 2016.]


Table 1: Parkson's last 8 quarterly results


Chart 1: Parkson's last 36 quarterly results 

Financial Position

As at 31/12/2015, Parkson's financial position is deemed mixed. Its liquidity position is satisfactory with current ratio at 1.2X. Its gearing ratio (computed by dividing Total Liabilities by Total Equity) is elevated at 1.4X. Working capital management is good as reflected by inventory holding period and receivables collection period are satisfactory at 39 & 23 days respectively.

Valuation

Parkson (closed at RM0.875 yesterday) is now trading at a PBR of 0.34 times (based on last 4 quarters' NTA of RM2.59 per share). Parkson has a negative PER as it recorded a net loss of RM56 million in the past 4 quarters.

Technical Outlook

Parkson is trading slightly below its all-time low of RM0.90 recorded in 2003. ADX & ADXR are both at very elevated level as the share price plunged from RM2.00 in March 2015 to the current level. While MACD has yet to cut above the MACD signal line, they are practically touching each other. With 10-month SMA and 20 & 30-month EMA well-spread out, the stock is poised for a rebounce.


Chart 2: Parkson's monthly chart as at Aug 26, 2015  (Source: ShareInvestor.com)

Conclusion

Despite the poorer financial performance & bearish technical outlook, Parkson is a good stock for long-term contrarian investment. At the present depressed price, the stock has probably priced for the worst scenario- a winding up. If that happens, you would certainly not lose money as its PBR is at 0.34X. With its good financial position, Parkson is in a good position to ride out of the current poor consumer market. When that happens, this stock could be a multibagger!!

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.