Positive over dual-branding strategy in Jakarta

PRA announced it will open its first Parkson branded store in Sep2013 at The St Moritz, a 35 hectare premium mixed development by the Lippo Group in West Jakarta. At present, Parkson’s only presence in Indonesia is via six Centrobranded stores which were acquired in Jun11. The Group intends to pursue a dual-branding strategy in Indonesia with Centro targeting the low-middle income and Parkson targeting the upper-middle income segment. We are bullish on the long-awaited decision and believe Parkson will gain a lot of traction in the market given its strong retail know-how and branding. This is already evident in Centro’s recent results where same-store-sales exceeded expectations, growing 9.8% in the 9MFY12. Pending further details from management, we maintain our earnings estimates and DCF-derived TP of S$1.68 (WACC: 9.2%, growth 2%) (24% upside). Re-iterate BUY.

First Parkson outlet in Jakarta in

Sep13. The first Parkson store will open at The St Moritz in the Puri CBD, West Jakarta, the city’s fastest growing district. Parkson will occupy the ground, upper ground and first floors, spanning a total of 17,101sqm of retail space. The St Moritz is a 35 hectare premium mixed-used development by the Lippo Group and is situated at the intersection of two major highways providing easy accessibility and extending the primary catchment areas to the north and south-east areas of Greater Jakarta.

Dual-branding strategy for Indonesia. PRA will continue to expand its network of Centro to at least 12 to 13 cities across Indonesia while Parkson department stores will be concentrated in the first tier cities such as Jakarta, Medan and Surabaya.

Bullish on Indonesia. We are bullish on domestic consumption in Indonesia, backed by a growing middle and upper class. The local department store industry is currently dominated by two giants ie. Matahari and Ramayana. We believe with Parkson’s strong retail knowledge and branding, it will fast gain a lot of traction in the market. This is evident in Centro’s strong same-store-sales growth for 9MFY12, which grew 9.8% YoY.