More Stock Sale Seen At Parkson

Sell when the share price is high!

Isn't this one common saying heard?

Take a look at this snip taken a Bursa website announcement announced on the 11t Aug 2009.

It looks like the owner is selling quite a fair bit.

And the remarks given in that announcement..

• The indirect interest after change comprises 343,910,310 Shares and RM228,800,000 nominal value of 3.5% redeemable convertible secured loan stocks 2007/2010 ("RCSLS") convertible into 57,200,000 new Shares at a conversion price of RM4.00 nominal amount of the RCSLS for every one new Share in Parkson Holdings Berhad. The percentage of indirect interest excludes the RCSLS.

So these loan stocks were converted into new shares at a conversion price of rm4.00 and since the share price is 'high' now compared to the months when Parkson was buying back their shares on a daily basis, these newly converted loan stock shares are sold for a tidy profit.

And when you compare the earlier disposal of shares mentioned in an earlier posting, it really seems like life is really grand.

However, if the shares are not sold for a tidy profit, what could be the reason for so many of these share disposals?

How my dearest?

Would You Buy Parkson Holdings?

Would You Buy Parkson Holdings?

It's incredible really.

How them local so-called experts had been raising their targets left, right and center. And sometimes we really wonder if the size of the upgrade is really worth the justification given the time frame and reasoning mentioned.

But then, some would point out that it's quite clear that the bulls are in charge and they dearly wants them stocks to move higher to the North Pole.

LOL!

And yeah, some cows can do pole dancing too!

On Business Times, there was an article which tried to republish what OSK said in its consumer sector report, Consumer product, retail stocks shine

• OSK says retail sales will recover gradually towards the year-end, boosted by the festive seasons and mega sales campaign
  
  CONSUMER products and retail stocks like Parkson Holdings Bhd, Hai-O Enterprise Bhd and AEON Bhd were traded higher yesterday, after OSK said retail sales will recover gradually towards year-end.
  
  "While we expect another soft quarter in the second quarter, it would be better than we anticipated earlier, given the rally in the equity market and the more positive overseas economic data in June.
  
  "We believe retail sales will recover gradually towards the year-end, boosted by the festive seasons and mega sales campaign," said OSK Research in a report yesterday.
  
  Four out of the 10 top gainers were made up of consumer products or retail related stocks, including Nestle, which added 5 per cent or RM1.50; Parkson, which rose 4.4 per cent or 24 sen; Dutch Lady, which added 1.8 per cent or 20 sen; and British American Tobacco, which climbed 1.5 per cent or by 70 sen.
  
  Shares of Padini, NTPM, Hai-O and AEON, which is under OSK's coverage, also went up by between 0.4 and 3.3 per cent yesterday, which is in line with the benchmark index FTSE Bursa Malaysia KLCI that rose 0.7 per cent.
  
  OSK placed a "buy" call on Parkson and Padini, with a target price of RM6.60 and RM2.94 respectively, while remains "neutral" on stocks like Hai-O, AEON and NTPM.
  The research house also expects retail sales recovery to be more apparent in 2010, driven by an anticipated stronger gross domestic product data in 2010, with anticipated lower unemployment rate due to improved business sentiment, rebound of the equity market and positive news flow from overseas, among others.
  
  "Car sales had shown consistent sales growth of 9 per cent over the last three months, while mortgage home loan approvals, which are a leading indicator of home sales, had gone up significantly from March to May this year.
  
  "Although property and car sales are not directly related to retail sales, their rebound nonetheless suggests that consumers have started buying big ticket items, thus boosting demand for consumables which are much cheaper," it said.
  
  It also added that significant margins erosions for retailers will be less likely in the second half, and that the A H1N1 pandemic would have negligible impact on the retail industry.

Hmm... the justification or the reasoning was that "retail sales will recover gradually towards the year-end, boosted by the festive seasons and mega sales campaign."

Now that is a solid justification..... but.... but... butt.... my dearest, do look at the key word, which is recover gradually.

No promises but there is a likelyhood that it could recover gradually.

And we aren't even talking about massive growth. Just the plain 'gradual recovery'.

So now think outside for a moment. If one is NOT in the sector, do we want to buy in?

And if we do, don't we want buy to buy them stock at a cheaper price (to mitigate the risks) and not chase the stock as if tomorrow never comes?

No worries they say, buy higher sell higher yo! Buy the momentum!

Yeah, it could work but what if this simple reasoning falls short? Would you then turn into a long term investor due to the wrong reasoning?

Let's take a look at Parkson Holdings. I chose this one simply because there was quite a lot of postings on this stock already. For example, the following posting was made on Monday evening. Life Is Grand For Parkson Holdings

Now as I had said Business Times tried to republish or reproduce what OSK had said. Sometimes such republications is not accurate. Take a look at the red bold statement.

• OSK placed a "buy" call on Parkson and Padini, with a target price of RM6.60

Ah.. I remember jitseng asking for fair reporting. :D

Now the statement itself is accurate..... but... but... but..... butttt..... it's not FAIR reporting.

OSK had only started coverage on Parkson on 4th June 2009.

Parkson was at 4.84 and OSK calls a BUY with a target of 5.50.

Fair enough.

Yesterday, OSK published its 'consumer sector' report. It had to included Parkson, no?

Now Houston we do have a problem.

Parkson Holdings is now 5.47!

What to say? What recommendation to give Parkson?

Well, this is what OSK wrote.

And so Parkson now have a TP of 6.60.

Now this is where Business Times could be more accurate and practise some fair reporting. This 6.60 is an upgraded target price from 5.50. A target given just less than 2 months ago.

Oh yeah, Parkson soared yesterday too! LOL! It closed at 5.64. The boss could be mighty happy because there is a chance for him to dispose more shares at a higher price! See the share disposals mentioned in the posting: Life Is Grand For Parkson Holdings. Would he be selling more? Would he? Let's hold our breath and wait.

Now back to issue of buying Parkson the stock.

Let's discount the fact that while we buy, the boss could be disposing more shares.

Let's have a look at where Parkson the stock is at right now.


And this is where Parkson is at today.

OSK is asking you to buy because it thinks because of the chances of 'gradual recovery' (mind you and not massive growth reasoning), consumer stocks like Parkson is worth a buy. It reckons it could be worth 6.60.

Just ignore the stock used to trade in the low 3.00s back in March.

That's the past.

Stock markets don't look at the past. They look at the future. And the future as OSK calls it, the stock should hit rm6.60.

How now my dearest?

You buy this?

And what about the time frame.

Isn't it a wonder?

2 months ago this company is worth 5.50. Now it should worth at least 6.60.

Why do a company's valuation change in such a short time frame? Why?

Or does the stock market sentiments rules over the company's valuation?

Market hot means the stock should be worth more?

How now?

Life Is Grand For Parkson Holdings

Life is wonderful.

Life is grand.

Blogged previously: Share BuyBacks: Parkson Holdings Part II. As mentioned in that posting, Parkson Holdings had spend a fortune in its share buybacks program.

Now if my data entry is not too way off, Parkson splashed out a whopping 93 million ringgit on this incredible share buy back program.

And of course, with the recent happy shooting stock markets globally, Parkson Holdings last traded at 5.40, which means that these share buy backs could mean that Parkson Holdings is sitting on a nice tidy profit. That's of course is good news for Parkson and it's minority shareholders.

How can complain?

Who wants to complain?

LOL!

Of course, unless it's me.

Now do you know that another party is so happy with this outcome.

So happy that they are disposing their shares. Take a look.

03/08/2009 Changes in Director's Interest (S135) - TAN SRI CHENG HENG JEM

• Disposed 31/07/2009 445,200 5.358
  Disposed 31/07/2009 230,000 5.358

31/07/2009 Changes in Director's Interest (S135) - TAN SRI CHENG HENG JEM

• Disposed 30/07/2009 554,800 5.350

29/07/2009 Changes in Director's Interest (S135) - TAN SRI CHENG HENG JEM

• Disposed 28/07/2009 1,000,000 5.385

20/07/2009 Changes in Director's Interest (S135) - TAN SRI CHENG HENG JEM

• Disposed 15/07/2009 1,500,000 5.005
  Disposed 16/07/2009 29,000 5.100
  Disposed 17/07/2009 1,600,000 5.050

03/07/2009 Changes in Director's Interest (S135) - TAN SRI CHENG HENG JEM

• Disposed 26/06/2009 1,000,000 4.980
  Disposed 29/06/2009 1,000,000 5.001
  Disposed 02/07/2009 146,300 5.021

25/06/2009 Changes in Director's Interest (S135) - TAN SRI CHENG HENG JEM

• Disposed 19/06/2009 1,000,000 4.704

17/06/2009 Changes in Sub. S-hldr's Int. (29B) - TAN SRI CHENG HENG JEM

• Disposed 10/06/2009 3,556,000 4.844
  Disposed 11/06/2009 1,832,000 4.806
  Disposed 12/06/2009 1,168,000 4.764
  Disposed 15/06/2009 180,300 4.800
  Disposed 16/06/2009 1,819,700 4.707

And the list goes on....

How?

Is the reason for Parkson's share buybacks so that the majority shareholders can dispose their shares?

How nice!

Now isn't this why you need to be a long term insider in Parkson. So says the expert! LOL!

Life is grand!

Share BuyBacks: Parkson Holdings Part II

It's been a long time since I had updated on Parkson's share buybacks.

I've compiled a table and loaded it into this posting. Do note that due to sheer size of the table and that I am but human, error in data entry could happen. It's too huge for me to check back. :P

*************

As per my entries, it would appear that Parkson had spend some 93 million in share buybacks.

Average cost is around 4.42.

Oops.... how much is Parkson trading now? hmmmm..... LOL! Yeah... see, I am posting something positive, eh?

Ho ho ho.... how? Value woh... buy ah?

**************
Anyway... cough... cough... cough....

if the current share price of Parkson isn't taken into consideration... aren't you shocked at the monetary value of the share buybacks?

At least 93 million woh.

When I first blogged on this issue, almost exactly a year ago, Pakson Holdings Share Buybacks, Parkson back was sitting on a whopping 'paper loss' of around some 6.4 million. Now it's sitting on 'paper gains'. (Success story? LOL! See, I do give credit when credit is due)

How now my dearest?

:D

***************

harlooo... this is just a mere observation. And if you insist it's a tip... lol.... don't blame me if you don't lose money.

**************

ps... do you think it's ironic? Parkson has stopped buying back their shares since end March 2009. Their shares had been moving higher and higher since then. LOL! Maybe as some uncle would proclaim... Parkson is jinko to their own shares! LOL!

Update On Parkson Holdings Earnings

Parkson Holdings.

If I remember correctly, many had argued that it was ok to buy Parkson Holdings based on more than 50x times earnings because for Parkson case was special. Special because it had an incredible growth story.

Now what if the earnings growth is gone? Is this not possible?

A couple of months ago, on 25 Feb 2009 Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Parkson announced that it made 104 million.

Today? It's earnings fell to just 75.935 million.

How now?

Still can consider as a growth stock?

Or should one twist and turn and rebrand Parkson as a value stock?

LOL!

Last November 2008, I wrote A Quick Look At Parkson Holdings Earnings and Reply To Comment On Parkson Holdings and I highlighted the issue on receivables and borrowings.

I wrote the following.....................................

--------

Here's my reason why I think it's unreal.

a. Last I checked, Parkson Holding is a retail business and in the economics of a retailing business, I cannot understand how Parkson can even have receivables. What exactly are they selling on credit? Who OWES Parkson Holdings so much money? And why? I for one cannot see no logic in why a retailer would even have a receivables account!

b. The size of the receivables. At 451.349 million, the figure is insane. It's simply too high! In a short span of 3 months, the receivables jumped 175.804 million!!!!!

Now try not to think about stocks for a moment. Indulge with me for a moment.

Think of a real life normal business where you and your business associate has setup. And imagine you went on a holiday and upon your return, your partner shows you the accounts and you find out that suddenly so many people owe you so much money. How? Wouldn't you not be concerned? Wouldn't you find it so unreal?

I do not know about you but I write what I feel. And in this instance, for Parkson Holdings, I find it so unreal.

Borrowings. I find the amount of borrowings Parkson Holdings is unreal too. Yes, in my flawed opinion, it's in my opinion that Parkson Holdings is too unrealistically high for me to consider Parkson Holdings as an investment grade stock. Do understand that for the borrowing issue, this is my own opinion, which like I said it is obviously flawed, hence, I do hope you take my view points stated here with a pinch of salt. And since I have repeatedly said that I am no investment advisor, I do hope you take all these comments as a mere second opinion and if you disagree, it's your rights to do so.

---------------------------

Let's see the current receivables as reported in Parkson's earnings today.

Ahem.

Receivables is now at 807.282 million!!!!!!!!!!

oO

And the loans?

If the business is truly making good money, why are the loans still increasing?

Its total loans as reported is now some 2.116 Billion! Last November it was 2.061 Billion!

Some would say that the Lion group sure love building up its total loans!

Yeah the earnings growth looks gone. No worries. The loan growth and the receivables growth are still intact!

LOL!

:p2

So don't worry, just be happy and just buy. :p2

Yeah, them wise ones would say all bad news are already priced in!

Charts Of Parkson

Here is the chart of Parkson Group.

Here is the chart of Parkson Holdings.


And here is the comparison chart drawn.



I wonder if it's just be but this is clearly not looking good for either stocks, yes?

And the following was posted recently.

• Parkson Retail credit outlook cut to 'stable'
  
  Published: 2009/01/09
  
  SHANGHAI: Parkson Retail Group Ltd, a Beijing-based department store chain, had its credit outlook reduced to "stable" from "positive" by Standard & Poor's Ratings Services after China sales slowed. The retailer's stock fell for a second day yesterday.
  
  The revision follows Parkson's announcement on January 6 that fourth-quarter sales growth in Chinese stores open at least 12 months cooled to between 7 and 8 per cent, S&P said. This compared with a 12 per cent gain for the year as a whole.
  
  "This would be much weaker growth than historical levels, and we expect the weak sales trend to persist in 2009," the ratings company said in a statement yesterday. "We expect Parkson's full-year 2008 results to be below our threshold for a rating upgrade."
  
  The retailer blamed a "deterioration of the trading environment" in China's export-driven coastal region as recessions around the globe cut demand for Chinese products, prompting job cuts and factory closures. Parkson, which is controlled by Malaysia's Lion Group, said in November that it planned "aggressive" promotions to encourage consumer spending along the coast.
  
  S&P also affirmed its BB long-term corporate credit rating on Parkson, according to its statement.
  
  The ratings company expects the retailer to show "satisfactory profit" for 2008 because of the growth potential of the retail sector in the country and Parkson's "favorable concessionaire model, its good operating margins and improving market position and geographic diversification."
  
  "These strengths are offset by ongoing execution risk associated with Parkson's rapid expansion plan and the fact that it is operating in a fragmented and increasingly competitive market," S&P added.
  
  Retail sales in China should have stayed at a "healthy" 21 per cent for 2008 while growth is likely to slow down in 2009, it said. The government's drive to boost domestic consumption will make the retail sector one of the more defensive in the country, it added.
  
  Parkson shares extended Wednesday's 16 per cent decline, closing 5 per cent lower at HK$7.18 (HK$100 = RM45.5) in Hong Kong yesterday. - Bloomberg

Reply To Comment On Parkson Holdings

Posted the following yesterday, A Quick Look At Parkson Holdings Earnings

caseywong said...

• hi, i have been a silent reader of your blog. I have some holdings in Parkson. Would like to know what is so unreal about the receivables part? And what about the borrowings? Mind to share more of your view on this? Thanks.

Casey,

Unreal about the receivables part?

Compare the first table and the second.

The first table showed:

1. Trade receivables at 14.411 mil
other receivables at 261.134 mil

total: 275.545 million.

The current table shows receivables as a lump sump, at 451.349 million.



Think about it...

Here's my reason why I think it's unreal.

a. Last I checked, Parkson Holding is a retail business and in the economics of a retailing business, I cannot understand how Parkson can even have receivables. What exactly are they selling on credit? Who OWES Parkson Holdings so much money? And why? I for one cannot see no logic in why a retailer would even have a receivables account!

b. The size of the receivables. At 451.349 million, the figure is insane. It's simply too high! In a short span of 3 months, the receivables jumped 175.804 million!!!!!

Now try not to think about stocks for a moment. Indulge with me for a moment.

Think of a real life normal business where you and your business associate has setup. And imagine you went on a holiday and upon your return, your partner shows you the accounts and you find out that suddenly so many people owe you so much money. How? Wouldn't you not be concerned? Wouldn't you find it so unreal?

I do not know about you but I write what I feel. And in this instance, for Parkson Holdings, I find it so unreal.

Borrowings. I find the amount of borrowings Parkson Holdings is unreal too. Yes, in my flawed opinion, it's in my opinion that Parkson Holdings is too unrealistically high for me to consider Parkson Holdings as an investment grade stock. Do understand that for the borrowing issue, this is my own opinion, which like I said it is obviously flawed, hence, I do hope you take my view points stated here with a pinch of salt. And since I have repeatedly said that I am no investment advisor, I do hope you take all these comments as a mere second opinion and if you disagree, it's your rights to do so.

Cheers

A Quick Look At Parkson Holdings Earnings

Three months ago Parkson Holdings reported the following set of earnings: Quarterly rpt on consolidated results for the financial period ended 30/6/2008

Net earnings was 50.497 million.

The following was a snap shot of its current assets.

Today Parkson Holdings reported its latest earnings. Quarterly rpt on consolidated results for the financial period ended 30/9/2008

Net earnings improved to 60.162 million.

However, let's take a look at Parkson Holdings current assets.

Receivables has jumped to 451.349 million!

WOW!

Totally unreal!

Let's look at its debts.

3 months ago, Parkson reported it had the following set of debts.

Today, Parkson reported the following.

Massive Warning From Parkson Retail Group!

Read the following article published on Business Times: Parkson plans aggressive promotion in China

• Parkson plans aggressive promotion in China
  
  Published: 2008/11/15
  
  PARKSON Retail Group Ltd, the Beijing-based department store chain controlled by Malaysia’s Lion Group, plans aggressive promotions at some stores to combat an expected slowdown in consumer spending in China.
  
  The promotion will be introduced in China’s export-driven coastal region which will be “badly affected” by any recession in developed countries and where unemployment is expected to rise, the company said in a release to Hong Kong’s stock exchange yesterday.
  
  Consumer spending may be hurt in China as economic growth weakened to 9 per cent in the third quarter, the slowest pace in five years. Growth in the retail industry is expected to “moderate” as the global financial turmoil will slow wage and economic growth in China, Parkson said.
  
  “More job losses and the slowing economy are hitting consumer spending,” Fiona Wong, Hong Kong-based consumer analyst at Sun Hung Kai Securities, said before the earnings announcement. “I would be quite worried about their fourth-quarter sales performance.”
  
  The company said the measures were aimed at combating short-term challenges as it believes the Chinese government’s 4 trillion yuan (US$586 billion) stimulus package aimed at sustaining growth “will take time to materialise”.
  
  The retailer said third-quarter profit rose 27 per cent to 190.3 million yuan (US$28 million) as sales rose 23 per cent to 2.4 billion yuan. Same-store sales grew 14.4 per cent.
  
  Profit for the first nine months of the year rose 36 per cent to 608.9 million yuan, as sales rose 23 per cent to 7.6 billion yuan.
  
  The supermarket operator has bought out partners this year and said in May it will buy stakes in two stores from parent Parkson Holdings Bhd for 240 million yuan. - Bloomberg

Definitely not looking good at all for Parkson and if I remember correctly, Parkson has always been priced as a super growth stock commanding a very much higher earnings multiple for its stock price. Now the company itself is declaring that it plans an aggressive promotion to combat the slowdown in consumer spending! And if this is the case, I reckon Parkson could be re-rated much lower as it would lose its super growth stock status and it would also lose its command of its high earnings for its stock price!

Pakson Holdings Share Buybacks

Previously blogged: Are Share Buybacks Scams?

This morning, I had decided to take a deeper look into Parkson Holdings share buybacks.

As argued by Mr. Eric Englund:

• Repurchasing shares weakens a company’s balance sheet in three key ways in that cash, working capital, and equity are diminished by the dollar amount of the shares repurchased. When a company’s stock-buyback program, over time, adds up to billions of dollars, the negative financial impact can be staggering.

Parkson Holdings started its share buybacks on 1st April 2008.

Let's look at Parkson Holdings balance sheet before it started its share buybacks and the previously reported earnings report was made on Feb 2008, Quarterly rpt on consolidated results for the financial period ended 31/12/2007.

A quick look at their cash balances versus their borrowings.

Deposits, cash and bank balances.. 1,917,255
Long term borrowings & notes....... 2,183,393
Short term borrowings....................... 52,791

And on their income statement, the following is the direct impact of their cash/loans balances

Finance income 34,674
Finance costs (46,699)

Which means, Parkson is incurring a net 12.025 million (46.699 - 34.674) in financial costs for the quarter.

On 1st April 2008, Parkson embarked on its share buybacks. Notice of Shares Buy Back - Immediate Announcement

And I have compiled a table.

And as mentioned in the earlier blog posting, Parkson then had the following announcment made on the 29th April 2008: PARKSON-Conversion of RM195,200,000 Nominal Value of 3.5% Redeemable Convertible Secured Loan Stocks 2007/2010 into 48,800,000 New Ordinary Shares (“Conversion”) and as mentioned, what if one suspect that there might be an ulterior motive for the share buybacks?

Anyway, Parkson continued it's share buybacks. The following table shows Parkson continued share buybacks.

And if I tally the figures, as of yesterday, Parkson Holdings has purchased some 9,483,000 shares valued at a whopping 49,844,402.44.

Averaging this figure out, Parkson Holdings has bought back shares at an average price of 5.256.

As of yesterday closing price of 4.58, the CURRENT value of these shares that are bought back is 43,432,140.00

Which means, currently the 'paper loss' of these shares bought back is some 6,412,262.44.

And get this, IF and IF Parkson Holdings retest the recent low of 4.28 and assuming Parkson buys back no more, at 4.28, the value of these share bought back would only be worth 40,587,240.00. Which means Parkson Holdings would have squandered some 9,257,162 million in its share buybacks!

Ah of course, some would dare argue that Parkson Holdings should be adopting a buy and hope strategy for its share buybacks. LOL!

But seriously, don't you think that Parkson Holdings had spend far too much on its share buybacks? As of yesterday, money spend was 49,844,402.44!

Let's look at Parkson last reported earnings on May 2008. Quarterly rpt on consolidated results for the financial period ended 31/3/2008

A quick look at their cash balances versus their borrowings.

Deposits, cash and bank balances...... 2,007,898
Long term borrowings & notes........... 2,104,058
Short term borrowings.......................... 40,702

And on their income statement.

Finance income 33,303
Finance costs (47,190)

What's a better alternative to these share buybacks? Well for starters, Parkson is not 'truly' cash rich! Yes, it has tons of money in its piggy bank but not less us not forget the mountain of debts it has too!

For it to be spending so much money in its share buybacks is rather insane in my opinion. As can be seen above, Parkson Holdings incurred some 13 million due to its massive financial costs for its most recent quarterly earnings. Wouldn't a better alternative is for Parkson Holdings to improve its balance sheet? ( Yup, such money ah? Bayar hutang la! )

Was Parkson Holdings shares really dirt cheap when it recklessly started buying back shares when Parkson was trading around 6.20 in April 2008? It last traded at 4.58 yesterday!

Do you really think that Parkson Holdings' share buybacks has given back 'value' to its shareholders or do you think that Parkson Holdings is simply being reckless in its management of its money?

How?

Parkson Retail Group Buys Stake In Subsidiary.

The following news article on Star Business caught my attention. Parkson unit buys 9% stake in Xi’an Lifeng

• Thursday July 3, 2008
  
  Parkson unit buys 9% stake in Xi’an Lifeng
  
  PETALING JAYA: Hong Kong-listed Parkson Retail Group Ltd, a subsidiary of Parkson Holdings Bhd, is acquiring a 9% stake in Xi'an Lucky King Parkson Plaza Co Ltd (Xi'an Lifeng) for 55 million yuan (RM26mil).
  
  It already owns 91% interest in Xi'an Lifeng through wholly owned indirect subsidiary Hong Kong Fen Chai Investment Ltd.
  
  Parkson told Bursa Malaysia that Parkson Retail, via wholly owned indirect subsidiary Golden Village Group Ltd, bought from Wang Lawrence the entire equity stake in Duo Success Investments Ltd, which in turn owned Huge Return Investment Ltd, the holder of the 9% shareholding in Xi'an Lifeng.
  
  Xi'an Lifeng is the owner and operator of two Parkson department stores in Xi'an City, Shaanxi Province.
  
  In addition, it owns a 51% stake in Xi'an Chang'an Parkson Department Store Co Ltd and Xi'an Shidai Parkson Store Co Ltd respectively, which each own and operate one Parkson department stores in Xi'an City.
  
  The remaining 49% stake in Xi'an Chang'an Parkson is owned by Parkson Retail through an indirect subsidiary. On March 27, it has entered into an agreement to buy the remaining 49% stake in Xi'an Shidai Parkson.
  
  Upon completion of the various acquisitions, Parkson Retail will own indirectly 100% interest in four department stores in Xi'an City.

You know the following part is way too complicated for me to decipher.

• Parkson told Bursa Malaysia that Parkson Retail, via wholly owned indirect subsidiary Golden Village Group Ltd, bought from Wang Lawrence the entire equity stake in Duo Success Investments Ltd, which in turn owned Huge Return Investment Ltd, the holder of the 9% shareholding in Xi'an Lifeng.

And since I had blogged on Lion Diversified Acquisition of Subsidiary at RM61.55 million! the other day, this acquisition by Parkson Retail Group makes me wonder why this group of company has a habit of making acquisitions of subsidiaries?!

Don't believe? Here's another recent acquisition. Just in May 2008.

• 23-05-2008: Parkson transfers assets
  by Sharmila Ganapathy
  
  KUALA LUMPUR: Grand Parkson Retail Group Ltd, a 53.52%-owned subsidiary of Parkson Holdings Bhd, is proposing to acquire the entire interest in another Parkson subsidiary Jet East Investments Ltd for RM110.4 million in a combination of cash and new shares.
  
  Parkson told Bursa Malaysia yesterday Parkson Retail was acquiring Jet East from East Crest International Ltd to be satisfied via RM55.2 million cash and the balance RM55.2 million via the issuance of 1.99 million Parkson Retail shares priced at HK$0.10 each.
  
  Parkson Holdings wholly owns East Crest. Jet East owns Victory Hope Ltd, which in turn holds 70% and 100% of the Tianjin Parkson and Nanning Parkson stores, respectively.
  
  Parkson Holdings said the disposal was in line with terms under a deed on non-competition entered into between Parkson Holdings, East Crest and Parkson Retail last September.
  
  The deed provides for a call option exercisable by Parkson Retail on certain unlisted subsidiaries of East Crest in China including the Tianjin and Nanning stores.
  
  It said proceeds from the disposal would be used as working capital and general investments. Prior to its suspension yesterday pending the announcement, Parkson Holdings Bhd shares’ were last traded at RM6.60.
  
  Parkson Retail, which was listed on the Main Board of the Hong Kong Stock Exchange in 2005, manages a large network of Parkson department stores in China.

Won't you agree?

It's like don't they have other BETTER business to do besides having one subsidiary buying yet another subsidiary?

No other business meh?

Regarding RHB's report on Parkson

Was reading the report on Parkson Holdings dated 17th March from RHB Research.

The following are some key issues pointed out in the report.

• Same-store sales (SSS) growth to remain strong. In 2007, Parkson recorded same-store sales growth of 18.4% for its China operations, 8% for Parkson Malaysia and 37% for Parkson Vietnam. Parkson China remained the main income driver, contributing more than 90% to the groupfs operating income in FY07. Its stellar performance was in tandem with the burgeoning retail sales in China, which grew 16.8% in 2007 underpinned by improved consumer confidence and rising rural income. Going forward, we expect China retail sales to remain robust in the advent of the Beijing Olympics. However, we reduce our SSS growth projections for China to 17% (from our earlier projections of 20%) for FY08-10, to be in line with management guidance of 15-18% p.a.. As for Parkson Vietnam, we raise our SSS growth projections to 25-27% (from our earlier projections of 20%) for FY08-10. The compelling SSS growth in Vietnam is mainly attributable to the low-base effect. We maintain our SSS growth projections of 6% for Parkson Malaysia for FY08-10.
  
  Average 10-13 new stores per year to be opened in FY08-10. Over the next three years, Parkson plans to open an average 5-7 new stores per year in China, 2-3 in Malaysia and 4 in Vietnam. This is higher than our original assumptions of 4-5 new stores per year for China and 0-1 for Malaysia for the FY08-10 period. Specifically for 2008, Parkson plans to open 7 new stores in China, 5 in Malaysia and 4 in Vietnam. In China, Parkson and its 53.1%-owned Hong Kong-listed Parkson Retail Group (PRG) could expand its presence via: 1) acquisition of Parkson's managed stores; 2) purchase of minority stake in stores which are not wholly-owned by the group; or 3) acquisition of competitors' stores. Currently, Parkson has 12 managed stores, which could be part of its acquisition targets going forward. According to management, it would consider paying an average of 10x earnings for the managed stores. Alternatively, Parkson could also acquire the minority stakes of the 9 Parkson stores which are not fully owned, to fuel growth. PRG is already in the midst of acquiring the minority 49% stake in Xi'an Chang'an Parkson, pending the procurement of the requisite confirmation letters from all minority shareholders. We expect PRG to conclude this deal in 1H2008. On the domestic front, Parkson plans to open one new store each in Kuching, Kuantan, Melaka, Kuala Terengganu and Kota Baru this year. Given the more aggressive store expansion plans, we now increase our new store assumptions to 5-7 stores per year (from 4-5) for China, and 1-5 stores (from 0-1) for Malaysia for FY08-10. We maintain our assumption of 3-4 new stores per year to be opened in Vietnam in FY08-10.
  
  Margin improvement on the way. Parkson has been adopting an asset-light approach when setting up new stores in China, i.e. leasing the property instead of acquiring. This would allow the company to expand expeditiously without locking up too much capital. Capex for FY08-10 is projected at RM106-182m p.a., which is mainly for new stores and refurbishment. New stores are estimated to break even after 2 years of operation. Parkson has a high operating leverage in which fixed costs (rental and staff costs) account for a significant 29% of the group's total operating expenses. As such, according to management, SSS growth of 18% for its China operations would translate into a higher EBIT growth of more than 30%. Our forecasts have already factored this in, as we have projected higher EBIT growth of 30-50% p.a. over the next three years, compared to revenue growth of 20-40%.
  
  Risks
  
  Risks to our view. A sharp slow down in consumer spending in China, Malaysia and Vietnam.
  
  Mitigating factors. China's retail sales grew by 20.2% per month in January and February 2008, which indicates that consumer spending in China remains robust at the moment. As such, we believe a sharp drop in consumer spending in China is unlikely to occur in the near term. Post-2008, we expect retail sales to moderate slightly and have projected a lower SSS growth for China of 16% for 2009-10 from the estimated 17% in 2008. As for Malaysia, consumer spending in 2008 should remain relatively stable, given that the expectation of a petrolprice hike after the general election could now be delayed. Post-2008, we expect consumer spending to remain resilient, underpinned by increasing consumerism of the relatively young population. As for Vietnam, we expect to see an influx of foreign investments in Vietnam over the next few years, which would create job opportunities,thus boosting consumer spending power.

Their investment justification is reasoned as follows.

• Investment case. We continue to like Parkson for its exposure to fast growing economies, i.e. China and Vietnam. Given its size and extensive network in China, Parkson should appeal to world class brand merchandisers who intend to start retail businesses in China. This is particularly important to Parkson as having the right portfolio of brands is one of the core competencies in setting up a department store in China. Specifically, we believe 2008 will be an exciting year for Chinese retailers like Parkson due to the potential growth in GDP and consumer spending brought about by the Beijing Olympics. According to ArgMax.com's research, "Prior to the Olympics and during the Olympic year, the host countries would experience higher than average GDP growth, maxing out at nearly 1.5% above average GDP in the 3rd year before the Olympics. However, the growth rates are lower in the years after the Olympics". According to the Beijing Municipal Statistics Bureau, the Olympics is expected to add no less than 2 percentage points a year to the nationfs GDP growth for the seven years to 2008 and to create as many as 2.1m new job opportunities. As such, we continue to be positive on the retail industry prospects in China over the next 3 years.
  
  Over in Vietnam, Parkson is one of two foreign retail operators who have been granted a licence to set up department stores in Vietnam before it is opened up to other foreign operators in 2009. This will provide the group the first mover advantage to position itself to enlarge its size and market share to be more competitive against other foreign department store operators in future years. As such, with the first mover advantage and using an identical business model as the one adopted in China, we believe Parkson would be able to reap similar successes in Vietnam within the next few years. Parkson Malaysia, meanwhile, should continue to record stable consistent growth over the three years, underpinned by the increasing consumerism of the relatively young population.

Caught the early morning news on Nike. Nike Profit Tops Forecasts on Strong Overseas Sales

• The company has seen rapid growth in emerging markets for its Nike footwear as it ramps up for the Beijing Olympics and robust demand for its smaller, non-Nike brands. It claims sports items are relatively immune to economic downturns, but has been controlling inventory in a challenging U.S. marketplace as athletic shoe retailers struggling.

Sales in Asia were simply astounding.

Which reflected what's said in the ArgMax.com's research mentioned in the RHB report. "Prior to the Olympics and during the Olympic year, the host countries would experience higher than average GDP growth, maxing out at nearly 1.5% above average GDP in the 3rd year before the Olympics. However, the growth rates are lower in the years after the Olympics".

I believe that one should not discount this issue if one wants to be a long term investor in Parkson. At this moment of time, sales are simply booming in China but would there be a possibility that it could slow down after the Olympics? However, I reckon that most that have actually shopped and witnessed what's happening in Parkson stores in China would very much argue that sales should still continue to boom.

Parkson's potential in Vietnam as first mover as pointed out by RHB is most interesting.

And of course the statement by the management on same store sales is most interesting.

• According to management, SSS is expected to grow at 15-18% in China, 6% in Malaysia and 25-30% in Vietnam in 2008.

As projections tend to be rather optimistic by most management, a same store sales projection of 6% reflects my pessimistic view on Parkson Malaysia.

Anyway, here is a screen shot of how RHB is valuing Parkson Holdings.

Would you be a buyer of Parkson Holdings?