Parkson Holdings - Share dividend yield of 7% BUY, 25 Jun 2015

We reaffirm our BUY recommendation on Parkson Holdings with an unchanged value of RM2.65/share, pegged to 16x PE on FY16F earnings. Parkson had recently distributed share dividends on the basis of 3 treasury shares for every 50 ordinary shares, amounting to 60.8mil treasury shares. This translates into a 7% yield of share dividend based on yesterday’s closing price of RM1.66/share. More significantly, management continues to reaffirm its commitment to engage in active share buybacks. We believe this will provide limited downside risk to share price given the attractive share dividend yield.

Currently, Parkson’s cumulative outstanding treasury shares stands at 63.1mil. Assuming a potential full distribution of this outstanding treasury shares, Parkson’s yield of share dividend is estimated at 7%. All in, Parkson’s transformation into a lifestyle concept retail business and regional-wide branding exercise remains intact. This should help sustain sales/psf, while the persistent brand building phase (i.e. investing in exclusive brand and in-house labels) bodes well for margins. The stock is presently trading at 10x FY16F PE, below its 5-year historical average PE of 19x.

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