PP 7767/09/2010(025354)

Corporate Highlights RHB Research

Institute Sdn Bhd
A member of the
RHB Banking Group
R e su l ts N o t e Company No: 233327 -M

25 May 2010
MARKET DATELINE

Parkson Holdings Share Price

Fair Value
:
:
RM5.15
RM6.40
On Track To Meet Full Year Forecast Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (Parkson; Code: 5657) Bloomberg: PKS MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/NTA P/CF ROE Gearing NDY
June (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (x) (%)
2009a 2583.7 263.2 25.4 31.6 20.3 - 2.9 27.7 15.0 net 1.0
2010f 2872.6 302.7 29.2 15.0 17.7 29.0 3.5 17.0 15.3 net 1.4
2011f 3576.4 376.2 36.3 24.3 14.2 37.0 4.4 8.5 16.5 net 1.6
2012f 4340.6 476.4 46.0 26.6 11.2 44.0 5.6 6.1 17.9 net 1.7
Main Board Listing /Non-Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

♦ In line. Parkson’s 9MFY06/10 core net profit of RM238.8m (+14.9%) was RHBRI Vs. Consensus
Above
in line with our and consensus expectations, accounting for 79% and 78%
In Line
of our and consensus full year forecasts respectively. In 9M10, Parkson
Below
recorded a RM20m one-off share option expense for PRG. The higher core
Issued Capital (m shares) 1036.4
net profit was attributable to: 1) 4.8% yoy revenue growth arising from
Market Cap(RMm) 5337.5
SSS growth, inclusion of full year contribution from new stores as well as
Daily Trading Vol (m shs) 1.1
inclusion of new stores opened in 9M10 (China: Lanzhou, Changsu and 52wk Price Range (RM) 4.57-6.20
Shijiazhuang; Malaysia: Kota Bahru, Kota Kinabalu and Kluang; and Major Shareholders: (%)
Vietnam: Ho Chi Minh); and 2) better EBIT margin i.e. +1.0%-pt yoy Cheng family 35.0
arising from lower A&P activities following improved operating Lion Industries 20.0
environment and consumer sentiment. As expected, no dividend was
declared during the quarter.
FYE June FY10 FY11 FY12
♦ In 3Q10, SSS grew by 10.8%, >7% and 20-25% yoy in China, Malaysia EPS chg (%) - - -
Var to C.EPS (%) 0.7 (1.9) 4.5
and Vietnam, respectively. SSS growth for China and Vietnam is currently
in line with management’s target of 10% and 20-25% yoy in CY10 and PE Band Chart
FY10 respectively, while SSS growth in Malaysia is currently above
management guidance of 5-6%. While SSS growth for China is in line PER = 21x
with our expectations of 11% yoy in CY10, both Malaysia and Vietnam are PER = 17x
PER = 13x
currently above our forecasts of 4% and 15% yoy respectively, in FY10.
Nevertheless, we choose to remain conservative and maintain our
forecasts for now.

♦ Injecting Parkson held China stores into PRG soon? We understand

that management will likely be injecting one to three Parkson held China
stores into PRG in 4Q10. The stores which would likely be injected include Relative Performance To FBM KLCI
Shantou and the 3 Qingdao stores. We believe that PRG will likely to
acquire these stores within its historical acquisition PE of 13-17x.
Parkson Holdings

♦ Forecast. No changes to our earnings forecasts.

FBM KLCI
♦ Risks. Any contraction in consumer spending in China, Malaysia and
Vietnam.

♦ Investment case. We believe that the current price weakness is an

opportunity for investors to buy into Parkson for China’s retail growth.
Maintain our unchanged SOP-derived target price of RM6.40 (see Table
2). No changes to our Outperform recommendation on the stock. Hoe Lee Leng
(603) 92802239
hoe.lee.leng@rhb.com.my
Please read important disclosures at the end of this report.

Page 1 of 4

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com
 25 May 2010

Table 2: Earnings Review (YoY)

FYE Jun 2009 2010 2010 %QoQ % YoY 2009 2010 % YoY Comments
(RMm) 3Q 2Q 3Q Chg Chg 9M 9M Chg
Turnover 703.3 709.3 753.9 6.3 7.2 2009.3 2105.1 4.8 Higher revenue
underpinned by SSS
growth, inclusion of full
year contribution of new
stores as well as inclusion
of new stores opened in
9MFY06/10 (China:
Lanzhou, Changsu and
Shijiazhuang; Malaysia:
Kota Bahru, Kota
Kinabalu and Kluang; and
Vietnam: Ho Chi Minh).

EBIT 202.9 207.6 217.9 4.9 7.4 547.2 595.0 8.7 See EBIT margin.
Adj-EBIT 202.9 207.6 237.9 14.6 17.2 547.2 615.0 12.4
Net interest (14.3) (15.4) (11.7) (24.1) (17.9) (43.4) (42.9) (1.1)
income/(exp)
Associate 0.2 0.0 0.1 27.3 (64.6) 0.6 0.1 (79.9)
EI 0.0 0.0 (20.0) - - 32.5 (20.0) (161.6) 9M10: From the RM20m
one-off share option
expense; 9M09: From the
disposal of 70% equity
interest in Nanning
Parkson and 100% equity
interest in Tianjin Parkson
to PRG.
Pretax Profit 188.8 192.2 206.2 7.3 9.2 537.0 552.2 2.8
Adj-PBT 188.8 192.2 226.2 17.7 19.8 504.5 572.2 13.4 Flow through from EBIT.
Taxation (42.4) (46.4) (51.4) 10.9 21.2 (114.4) (133.2) 16.4
Minority Interest (70.4) (65.5) (71.3) 8.8 1.3 (182.3) (190.6) 4.6
Net Profit 75.9 80.3 83.5 3.9 9.9 240.3 228.5 (4.9)
Adj-net profit 75.9 80.3 93.8 16.8 23.5 207.8 238.8 14.9 Flow through from PBT.
Adj-EPS (sen) 7.3 7.7 9.1 16.8 23.5 20.1 23.0 14.9
Gross dividend (sen) 0.0 0.0 0.0 - - 0.0 0.0 -

Adj-EBIT Margin (%) 28.9 29.3 31.6 2.3 9.4 27.2 28.3 1.0 Due to lower A&P
activities.
Adj-Pretax Margin 26.8 27.1 30.0 2.9 11.8 25.1 27.2 2.1
(%)
Adj-Net Margin (%) 10.8 11.3 12.4 1.1 15.2 10.3 11.3 1.0
Adj-Effective tax 22.5 24.1 22.7 -1.4 1.1 22.7 23.3 0.6 The effective tax rate was
rate (%) lower than the statutory
tax rate due to lower tax
rate for retail operations
in China and certain profit
not taxable.
Source: Company, RHBRI

Page 2 of 4

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com
 Table 3: SOP valuation
Valuation method RNAV (RMm) RNAV (RMm)
Share of PRG market value (51.6% stake) Indicative FV of HK$11.95, based on PER of 7,260.3
24x CY10 EPS
15% holding company discount to PRG 5,808.2
Parkson Vietnam 11.5x CY10 EPS 114.5
Parkson Malaysia 14.0x CY10 EPS 336.1
6 excluded stores in China 10x CY10 EPS 306.8
Net cash / (debt) ex-PRG (which excl. cash to purchase 438.1
Suntrans Building) as at Dec-09
Total 7,003.8
Fully diluted number of shares 1,093.6
Target price (RM) 6.40

Table 4. Earnings Forecasts Table 5. Forecast Assumptions

FYE June (RMm) FY09 FY10F FY11F FY12F FYE June FY10F FY11F FY12F

Turnover 2583.7 2872.6 3576.4 4340.6 China ^

Turnover growth (%) 15.2 11.2 24.5 21.4 - New stores 4 4 5
- Same store sales growth 10.0% 11.0% 11.0%
EBITDA 845.7 935.2 1135.9 1375.2
EBITDA margin (%) 32.7 32.6 31.8 31.7 Vietnam
- New stores 2 3 3
Depr&Amor (125.2) (143.4) (163.6) (165.4) - Same store sales growth 15.0% 18.0% 18.0%
Net Interest (61.7) (47.3) (26.2) (11.7)
Associates 0.7 0.3 0.3 0.3 Malaysia
- New stores 2 2 1
Pretax Profit 659.5 746.6 946.3 1198.4 - Same store sales growth 4.0% 5.0% 5.0%
Tax (163.6) (175.5) (236.6) (299.6)
Minorities (232.7) (268.4) (333.6 ) (422.4)
Net Profit 263.2 302.7 376.2 476.4
Source: Company data, RHBRI estimates
^ Forecast assumptions for CY09, CY10 and CY11.

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
(previously known as RHB Sakura Merchant Bankers). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions
and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be
contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Page 3 of 4

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com
Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

Page 4 of 4

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com