Affin IB Research cuts target price for Parkson to RM2.80

by **Cals** Thu 23 Jan 2014, 18:01

Business & Markets 2014

Written by theedgemalaysia.com

Thursday, 23 January 2014 09:35

KUALA LUMPUR (Jan 23): Affin IB Research maintained its Reduce rating on Parkson Holdings Bhd (PHB) at RM2.95 with a lower target price of RM2.80 (from RM3.38) and said the revision was based on: 1) a lower cash holdings (from RM250 million to RM230 million), as the group had utilized RM20 million to pay the deposits for its Cambodia malls and share buybacks; and 2) a lower target PER of 13x (16x previously) CY14 EPS for its 51.5%-owned China-based operations.

In a note Thursday, the research house said it pegged PHB’s China operation, PRG at a lower target PE multiple as there is no sign of a strong recovery in its operations. China’s economy has been adversely affected as the country clampdown on “Shadow Banking”.

As such, the IMF has recently lowered its GDP forecast for China to 7.5% in 2014 (2013: +7.7%), it said.

“Apart from the slowing GDP growth, we also gathered that the growth rate of retail sales in China has fallen and this does not auger well for PRG. The same goes for PHB’s Malaysian operation, we expect SSS growth to stay at low levels hovering at c.1-2%, in light of the rising cost of living faced by Malaysian.

“Pressured by higher sugar, electricity and fuel prices, we believe consumers in Malaysia will adopt a more prudent spending behavior going forward and this will surely post negative impact PHB’s products, deemed as discretionary items,” it said.