Singapore-listed Parkson Retail Asia Ltd (PRA), a 67.96%-owned subsidiary of Parkson Holdings Bhd, said it was no longer commercially feasible to stay in the country.
Parkson Vietnam Co Ltd will file an application to a court in Ho Chi Minh City for the commencement of voluntary bankruptcy proceedings today.
In a Bursa Malaysia filing, Parkson Holdings said the bankruptcy of PRA’s Vietnamese subsidiary is not expected to have a material impact on the group’s earnings for the financial year ending Dec 31, 2023 (FY2023) and its net assets based on the audited consolidated statement of financial position as at Dec 31, 2022.
The group’s share price on the local bourse has also seen little movement, dipping only 3.45% to 14 sen at 10.20am.
With its impending exit from Vietnam, PRA’s only operations will be limited to Malaysia and China.
According to its 2022 annual report, Parkson Holdings has 38 stores in Malaysia with a total retail space of 429,000 sq m.
“Parkson Vietnam has historically been operating at a loss, with such losses being compounded in recent years due to the challenging business environment due to the Covid-19 pandemic,” said PRA in a statement to the Singapore exchange, a copy of which was posted on Parkson Holdings’ filing with Bursa Malaysia.
PRA lamented the lack of support – in the form of rental reductions or negligible rental rebates, for example – from Parkson Vietnam’s landlord during the Covid-19 lockdown.
A high land tax imposed by the local government also added to the Vietnamese subsidiary’s woes.
“As such, the group has assessed and determined that it is not commercially feasible to continue its operations in Vietnam and the board of directors of Parkson Vietnam has determined that it will be in the best interests of Parkson Vietnam to file the application,” said PRA executive chairman William Cheng in the statement.
Cheng said the decision to shut down the sole remaining store in Vietnam is in line with PRA’s focus on its operations in Malaysia.
PRA remains optimistic about the overall market prospects due to improving consumer sentiments and the increasing numbers of foreign tourists.
“The group’s maximum potential exposure resulting from the voluntary bankruptcy of Parkson Vietnam will therefore be limited to its capital contribution in Parkson Vietnam. Notwithstanding the foregoing, the company had recognised full impairment loss on its capital contribution in Parkson Vietnam in its audited financial statements,” he added.
For FY2022, the Vietnam operations recorded a loss before tax of S$2.3 million (RM7.70 million) compared with a profit before tax of S$13.7 million (RM45.87 million) in the previous year, as revenue fell to S$2.4 million (RM8.04 million) from S$10.1 million (RM33.82 million) during the period.
At 10.20am, Parkson’s share price was down 3.45% or 0.5 sen to 14 sen, giving it a market capitalisation of RM166.59 million.