Parkson's Hong Kong unit issues profit warning

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KUALA LUMPUR (March 31): Parkson Holdings Bhd’s 52.71%-owned Hong Kong subsidiary Parkson Retail Group Ltd (PRGL) has issued a profit warning after China International Economic and Trade Arbitration Commission ruled it has to pay approximately RMB140 million or (RM83.68 million) to its landlord in Beijing, China.

The amount is for Parkson Retail Development Co Ltd’s (PRDC) continued occupation of four floors of the shopping plaza, after the termination of its tenancy agreement. PRDC is a fully owned unit of PRGL, according to Parkson’s filing with Bursa Malaysia today.

Parkson (fundamental:1.80;valuation:2.4) said the arbitral award, dated March 25, 2015, ordered PRDC to pay the sum to Metro City Shopping Plaza.

The matter was first brought up for arbitration in Dec 27, 2012.

According to an attached statement by PRGL, the approximate RMB140 million (RM83.68 million) payable to the landlord represents some 57% of the audited net profit of the group for the year Dec 31, 2014 (FY14).

PRGL also said based on a preliminary review of its unaudited consolidated management accounts for the two months ended Feb 28, 2015, it does not expect its operating results for the first quarter of 2015 to be able to cover the impact from the arbitral award.

Hence, PRGL said it expects profit of the group for the three months ended March 31, 2015, to decline “significantly”, as compared to corresponding period in 2014.

However, the company gave assurance results of the arbitral award will not have a material adverse impact on its business and operation.

It also noted trading in its securities which was suspended at 1.02pm on Monday, will resume with effect from 9:00am tomorrow (April 1).

Trading of Parkson’s shares, which has been suspended since 2.31pm on Monday (March 30) pending the PGRL announcement, will resume in tandem tomorrow.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)