PARKSON (5657) : Parkson: China Syndrome?
For QE30/9/2014, Parkson's net profit dropped by 25% q-o-q or 34% y-o-y to RM20 million while revenue inched up 4% q-o-q or 2% y-o-y to RM848 million. Revenue increased q-o-q due Muslim's festive season in Malaysia & Indonesia. Pre-tax profit dropped due to the challenging retailing operations in China, which is the result of the proliferation of e-commerce operation & weak discretionary spending. This has a negative impact on Parkson China's SSS growth.
Table: Parkson's last 8 quarterly results
Chart 1: Parkson's last 31 quarterly results
Valuation
Parkson (closed at RM2.48 yesterday) is now trading at a trailing PE of 20 times (based on last 4 quarters' EPS of 12.1 sen). If you expect the Chinese economy to recover in the near term, then we can expect Parkson's results to improve, leading to the rollback of the current high PE. Without an increased earning, Parkson's valuation is demanding.
Technical Outlook
Parkson has been in a downtrend since 2008. It is struggling to hang onto the support of RM2.50. If that support failed, then its next support is at the horizontal line of RM2.20 and then the psychological RM2.00 mark. Its immediate resistance is at RM3.00.
Chart 2: Parkson's monthly chart as at Nov 24, 2014 (Source: Share Investor)
Conclusion
Despite the poor financial performance for the past 2-3 years & bearish technical outlook, Parkson is a stock worth watching because it has dropped so much. I believe that the RM2.50 level is a strong support and the base for a bottoming phrase for this stock. If you are a contrarian, you might start to slowly accumulate this stock.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Parkson.
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