Yesterday, Parkson Holdings Berhad (PHB)’s Hong-Kong listed subsidiary, Parkson Retail Group (PRG) announced that the group’s proposed internal reorganisation has been rejected by its minority shareholders. A total of 63.4% of PRG entitled shareholders voted against the buying of Singapore-listed Parkson Retail Asia (PRA). Consequently, the group will not proceed with the proposed capital distribution, which was earlier pivoted on the proceeds obtained from the divestment of PRA shares to PRG. (Source: Bursa Malaysia)

Comments: Recall that PRG (through its wholly-owned subsidiary Oroleon (Hong Kong) Ltd) had earlier proposed to purchase the entire 67.6% stake from PHB-owned PRA, for a total cash consideration of SGD228.5m. We understand that PHB would have seen total cash proceeds of RM641m being added to its coffers had the exercise went through.

Nonetheless, we are neutral on this development as there will be no changes in PHB’s fundamentals and business strategy. Given PHB’s net cash position of RM907.9m, we believe that the group will face no issues in funding its business expansion in the future.

We make no changes to our earnings forecasts and maintain our HOLD call with unchanged TP of RM1.07. While we believe that the operations in its core markets will remain challenging over the next 12 months, we believe that the weak growth prospects have already been largely priced in.

Source: Affin Hwang Capital Research - 13 Oct 2015