Parkson Retail

Parkson Retail: Announced that it plans to enter Sri Lanka via the acquisition of a 41.8% stake in Odel, a leading fashion retailer with 17 stores targeting middle and upper-middle consumers. PRA will acquire its stake from the founding Gunewardene family for $13.6m. The Gunewardene family will retain a 41.8% stake and continue to run the operations. Odel generated $36.5m in rev and $1.9m in net profit in FY11, which would make up 3% and 2% respectively of PRA’s estimated FY12 rev and net profit given the partial ownership. However, the deal does mark PRA’s first foray into the Indian subcontinent, with long-term potential to enter new markets such as Bangladesh or even India (if the retail rules are relaxed there). Near term, Vietnam (10% of sales) continues to see macro-driven, weak retail sales, but Msia (78% of sales) and Indonesia (12%) should be strong enough for company to stay on track to meet its 25-30% profit growth guidance for FY12. CIMB maintains OutPerform with $1.80 TP.