This article first appeared in The Edge Financial Daily on March 21, 2018
Parkson Holdings Bhd
(March 20, 45 sen)
Maintain neutral with a target price (TP) of 75 sen: Parkson Retail Group’s (PRG) 60%-owned subsidiary, Wuxi Sanyang Parkson Plaza Co Ltd (Wuxi), was informed by Alibaba Judicial Auction Platform electronically that Wuxi succeeded in the bid for the properties at the first floor to the fifth floor of a building located in Liangxi District, Wuxi.
The judicial auction was held under the supervision of the Wuxi Intermediate Court, while the properties are owned by Wuxi Sanyang Yinhui Properties Development Company Ltd (Yinhui), a company established in China which was declared bankrupt by the Wuxi Intermediate Court. Wuxi has been occupying and using the properties as a tenant and department stores since 2008.
Two hundred million yuan (RM124 million) was the bid price submitted by Wuxi as the purchaser.
We deem the price reasonable, as the price was only 5.5% higher than the minimum bid price of 189.6 million yuan, and 15.6% lower compared to the valuation of the properties at 236.9 million yuan based on a valuation report dated August 29 2017.
The payment will be satisfied by internally generated funds of PRG, which should be no issue for PRG given its 727 million yuan cash as at Dec 31 2017.
At this juncture, a deposit of 20 million yuan has already been paid, with remaining 180 million yuan to be paid on or around March 25 2018.
We view the acquisition as justified given that the properties have been occupied as part of PRG’s business since 2008.
Apart from strengthening its assets base, the acquisition will allow PRG to have better control over the usage of the properties going forward, while at the same time mitigating risks of rental expenses hike in relation to the properties. — PublicInvest Research, March 20