Thursday 25 May 2023

Parkson: The Lion Regains Its Roar

Imagine a wounded lion, enduring hardship, tending to its injuries yet preserving its inner strength. This metaphor mirrors Parkson, Lion Group's retail arm, as it navigated through years of core losses. 

However, like a revitalized lion that has healed from its wounds, Parkson released a subtle yet distinct roar of recovery in Q1 2023, signalling a recovery in the retail market. 

Parkson's Malaysian operations showed significant recovery, with revenues reaching RM201 million and operating profit up 60% to RM56 million. Meanwhile, in China, sales slightly dipped but operating profit rose to RM58 million due to improved efficiencies and cost control. 

However, the company decided to bite the bullet and cease operations in Vietnam after recording losses. 

Other divisions contributed higher revenue of RM16 million and operating profit of RM0.1 million. 

Notably, the Group achieved 23% revenue growth to RM838 million and a pre-tax profit of RM54 million (which includes a gain of RM23.8 million from the disposal of properties in China). 

Parkson has successfully achieved a positive turnaround, reporting a core profit of RM7.6m in Q1 2023, after excluding the gain from exceptional disposal. Its current market cap is RM172m.

Parkson Group may have a promising asset that is often overlooked in its portfolio: a controlling interest of 55% in Parkson Credit, a company specialising in motorcycle financing. Despite already achieving net profits of RM12m in FY2021 and RM14m in FY2022, as revealed by the company at the AGM yesterday, there are still opportunities for further expansion that the management is optimistic about.

At a closing price of 15 sen, the company is currently being traded at an 88.8% discount to its net asset per share of RM1.34, despite having achieved profitability in Q1 2023.

With the second quarter on the horizon, Parkson is optimistic. Expecting benefits from festive buying in Malaysia and resumed travel in China, they aim to further improve operational efficiency and diversify income sources. 

Parkson's roar of recovery, it seems, may reverberate even stronger in the coming quarters.

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