Parkson: Net Profit From One-off Gain

Result Update

For QE31/12/2016, Parkson reported a net profit of RM72 million on the back of a revenue of RM1.046 billion. Revenue rose marginally y-o-y but gained 19% q-o-q mainly due to higher consumer spending during the year-end festivities and the holiday seasons.

Parkson returned to profitability due to gain of RM802.3 million on disposal of Beijing Huadesheng Property Management Co Ltd, a subsidiary in China less impairment losses on intangible assets and other receivables of RM313.2 million. Despite the return to profitability, Parkson is not out of the wood yet as its operating loss increased actually to RM30 million from RM11 millionincurred in the same quarter last year.


Table: Parkson's last 8 quarterly results

 
Graph: Parkson's last 40 quarterly results 

Valuation
Parkson (closed at RM0.70 yesterday) is now trading at a PBR of 0.29 times (based on last 4 quarters' NTA of RM2.38 per share). Parkson has a negative PER as it recorded a net loss of RM111 million in the past 4 quarters.

Technical Outlook

Since my last posting, Parkson went below its the 2003 low of RM0.90 to make a low of RM0.62-0.63 in the past 2 months. Judging by the gaps between the 3 moving average lines and the share price, Parkson could be poised to a sharp rebound. All it needs is a convincing turnaround story which alas did not come from the latest quarterly result (though the headline number may look seductive!).


Chart 1: Parkson's monthly chart as at Feb 21, 2017 (Source: ShareInvestor.com)

If we looked at the daily chart, we can see that Parkson has just tested its intermediate downtrend line at RM0.73. If it can break above this downtrend line, we may see a short rally to RM0.85-0.90. I doubt it can surmount the psychological RM1.00 mark.


Chart 2: Parkson's daily chart as at Feb 21, 2017 (Source: ShareInvestor.com)

Conclusion

Based on poor 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 0.29X. If you have this stock in your portfolio, you should just hold onto it.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.