Friday, 18 August 2023

PARKSON: Is The Worst Over?

The businesses of Parkson Holdings Berhad (KL:5657) are spearheaded by i) The 54.67%-owned Parkson Retail Group Limited (“PRGL”), listed on The Stock Exchange of Hong Kong Limited; and ii) The 67.96%-owned Parkson Retail Asia Limited, listed on the Singapore Exchange Securities Trading Limited.

Parkson Holdings Berhad's 2Q23 results will be released soon, following the recent release of results by its overseas-listed subsidiaries.

Company

 

Market

Currency

1Q23 PATAMI

2Q23 PATAMI

 

 

 

 

(million)

(million)

Parkson Retail Group Limited

54.67%

HKEX

RMB

19.896

43.197

Parkson Retail Asia Limited

67.96%

SGX

SGD

9.176

8.85

Parkson Holdings Berhad

 

BURSA

RM

20.681

(EPS:1.8sen)

?

The Hong Kong-listed Parkson Retail Group Limited reported a significant improvement in PATAMI q-o-q, more than doubling from RMB19.896m to RMB43.197m.

It has been almost 5 years, since the previous dividend was declared by the Hong Kong-listed Parkson Retail Group Limited. With a turnaround in results, it has declared a dividend of RMB0.01/share.


“Looking ahead, with four new stores in the pipeline, the Group is well-positioned to capture growth opportunities in markets that we are very familiar with. These new stores will enable us to offer our customers an even wider range of high-quality products. As an outstanding commercial space operator, we aim to provide our customers with an exceptional shopping and life experiences. We are confident that these experiences will contribute significantly to our long-term sustainable growth and profitability.”

Meanwhile, even though Parkson Retail Asia Limited reported a slightly decrease in PATAMI on a sequential basis, from SGD9.176m to SGD8.85m, the PATAMI in Ringgit Malaysia term, could be little changed due to the strengthening of SGD against RM.

As these two foreign-listed companies are the two key subsidiaries of Parkson Holdings Berhad, we could reasonably expect the holding company to report stronger earnings in 2Q23 compared to the immediate preceding quarter.

Parkson Retail Group Limited

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

PATAMI 

PATAMI (RMB)

353.65

235.03

(186.15)

147.26

(135.95)

(79.28)

(222.75)

(250.11)

(175.98)

(413.18)

63.09

*Financial year end 31 December


Parkson Retail Asia Limited

2013

2014

2015

2016

2017

2018

2019

2020

2021
18 months

2022

1H23

PATAMI (SGD)

38.58

34.38

(34.69)

30.18

(58.22)

(42.67)

(34.60)

(84.93)

13.73

28.76

18.03

*Financial year end 30 June (2013-2020)



Parkson Holdings Berhad

2013

2014

2015

2016

2017

2018

2019

2020

2021
18 months

2022

1H23

PATAMI (RM)

238.20

138.15

46.59

(95.74)

(120.90)

(99.44)

(129.18)

(436.35)

(101.80)

(119.95)

?

*Financial year end 30 June (2013-2020)

Parkson Holdings Berhad (KL:5657) reported EPS of 1.8sen in 1Q23. With an expectation of stronger 2Q23 results, it is likely that Parkson Holdings Berhad will turn around and record a full-year profit in 2023, after 7 consecutive years of losses.

How much EPS could Parkson Holdings Berhad make a year going forward? What is the reasonable target PE multiple for the stock?

Parkson Holdings Berhad: 10-year chart


PARKSON RETAIL GROUP LIMITED (HK:3368)


PARKSON RETAIL ASIA LIMITED (SI:O9E)

Thursday, 1 June 2023

CANDIDLY SPEAKING: AGM of Malaysia Airports Holdings Berhad (AIRPORT)

The 24th AGM of AIRPORT took place today, during which comparisons were made between KLIA and other international airports, particularly Changi Airport in our neighbouring country, regarding amenities, operational efficiency, and cleanliness. How does a country with a population of less than 6 millions on a tiny island managed to host close to 70 millions of passengers pre-pandemic? 

The management of AIRPORT then explained that, to be fair, a departing passenger has to pay RM105 of passenger service and security fee plus RM38 of airport development levy to Changi Airport, while at Kuala Lumpur International Airport (KLIA), a departing passenger pays only RM35 of passenger service charge. 

I did a check, and the total payable to Changi Airport was actually close to RM200, or RM194.31 at the time of checking. 


CANDIDLY SPEAKING: Well, for a departing international passenger, the amount payable to Changi Airport is about 5.5 times the amount paid to AIRPORT. Despite this, over 100 airlines continue to operate at Changi Airport, while KLIA has 63 airlines including codesharing. 

Why does Changi Airport have the pricing power to fix the fees and levies at such high levels? This is something that the government and AIRPORT need to consider. 

https://www.klia.info/airlines/index.htm

https://www.changiairport.com/corporate/partnerships/airlines.html

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.

Monday, 27 February 2023

SMRT: A Beneficiary of 5G Rollout?

5G, 5th generation wireless technology, is a great enabler for IoT. It allows massive number of connected devices and sensors to communicate with each other via wireless technology, known as the Internet of Things, IoT. It is key in creating the interconnected world of the future. 

N’Osairis Technology Solutions Sdn Bhd (“NTS”), a 64% subsidiary of Bursa Malaysia listed SMRT Holdings Berhad (0117), is a leading end-to-end provider of IoT solutions in South East Asia. It specializes in designing, setting up, and managing entire IoT ecosystem. It handles all the nitty-gritty details so that the clients can leverage the power of the Industry 4.0 revolution and run their businesses more efficiently than ever before. (source: https://nosairis.com/)

(source: https://nosairis.com/#services)

SMRT Holdings is exiting education business and becoming a pure play IT solutions firm. (source: https://www.theedgemarkets.com/node/654303)




In the company announcement dated 7 February, it proposed to:

i) Acquire the remaining 36% equity interest in NTS for a purchase consideration of RM72m (this values N’OSairis at RM200m)

ii) Dispose the 100% stake in SMR Education Sdn Bhd

iii) Establish a share grant plan of up to 20% of the total number of issued shares of SMRT for a duration of 10 years

(source: https://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=133806&name=EA_GA_ATTACHMENTS)

Historical revenue and PATAMI of NTS


(source: page 29 of the company announcement https://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=133806&name=EA_GA_ATTACHMENTS)

NTS reported increasing PATAMI in the recent years.


Balance sheet

as at end-2021, NTS has net cash of about RM26m.

PAT margin

has increased from 21.8% for FY19 to 39.4% for FY21

Cash flow

strong operating cashflow

Dividend

has been declaring dividend with decent payout ratio of 35.8% to 49.7%

ROE

ROE of 56.1% and 60.0% for FY21 and FY22 respectively

 


After the proposed disposal and acquisition, on pro-forma basis, the group has total borrowings of RM2.285m and likely to be in a net cash position.

 

 

FY19

FY20

FY21

9MFY22

NTS PATAMI

9142

14017

20109

?

NTS PAT

9092

13986

20150

?

SMRT Tech segment PAT

15509

13659

17470

19425

It was not disclosed how much NTS made for 9MFY22. The technology segment of SMRT has 2 subsidiaries, namely NTS (64% stake) and Talentoz Sdn Bhd (55% stake). Its 9MFY22 PAT of RM19.425m for SMRT tech segment has exceeded FY21 full-year PAT of RM17.470m.

The proposed acquisition of the remaining 36% stake in NTS at RM72m values the entire NTS at RM200m.

At a closing price of RM0.31, SMRT has a market cap of RM138.732m. If the proposals go through, for a tech company that has high profit margin, high ROE, healthy balance sheet, good cashflow and could potentially benefit from the rollout of 5G network, what is the fair target P/E multiple and market cap for the group?

Target market cap (RM’m) = target P/E (x) X Expected earnings (RM’m)

 

Board of directors: https://www.smrt.holdings/board-of-directors