Parkson Retail Asia

Parkson Retail Asia: UOB Kay Hian released an unrated note on Parkson (current share price: $0.475). Parkson is currently trading at 9.2x FY14 PE.

Parkson has a solid balance sheet where it maintains a net cash position of $7m. Due to the nature of its business, Parkson has generated very positive free cash flow of $15-30m for the last 3 financial years, underpinning its ability to consistently pay out dividends. It has been paying out at least 45% of its earnings as dividends since IPO in 2011.

For FY14, Parkson declared a dividend of $0.055/share, translating to an attractive dividend yield of 11.5%. For FY15, Parkson has already declared a special interim dividend of $0.04 as it rewards its shareholders after disposing of its Sri Lanka associate.

However, the outlook for the Malaysia retail market is expected to remain challenging in the near term with the introduction of GST in Apr 15. For 9MFY15, Parkson derived 87% of its profit before tax from Malaysia. Parkson will be opening 8 new stores in FY16 (4 in Malaysia, 3 in Indonesia and 1 in Cambodia).

Parkson has lost nearly 75% of its market cap since its high in 2013. While it continues to maintain a strong balance sheet during this period, earnings took a hit with weaker consumer sentiment in the region. 9MFY15 net profit dropped 20.1% YoY to $25.1m.