Companies

Lion Group plans to build malls in big cities

By Zhou Yan (China Daily)
Updated: 2011-04-29 10:04

A Parkson Retail Group Ltd shopping mall, owned by Malaysia's Lion Group, in Beijing. The group plans to open 10 to 12 new stores a year in China starting this year. [Photo / Agencies]

The company also seeks to penetrate into second- and third-tier cities

KUALA LUMPUR - Malaysia's Lion Group, a diversified conglomerate that controls Parkson Retail Group Ltd, said it plans to open as many as three large shopping centers in China's big cities this year, in an effort to expand its retail presence in the world's second-largest economy.

"Our target is to build three one-stop shopping malls a year with an area of 150,000 to 300,000 square meters each in China's larger cities such as Beijing and Shanghai," William Cheng, chairman and CEO of Lion Group, told China Daily in an exclusive interview.

Related readings:  Parkson to open more stores in China  Profit slowdown hits Parkson

Cheng was ranked the 12th richest man in Malaysia in 2010 by Forbes with an estimated net wealth of $660 million.

The plan will start this year. Each complex will offer shopping, eateries, entertainment, education and sports to provide convenience for urban dwellers, he said, without disclosing financial details.

He said shopping malls of this type will help save consumers' time given the worsening traffic conditions in China's big cities.

Construction of various apartments and office buildings is also in the pipeline after the shopping malls are complete, Cheng said.

The Chinese business now contributes 40 percent to Lion Group's total sales.

Lion Group's aggressive move follows Parkson Retail's solid presence in China by operating 48 Parkson-branded department stores in about 30 cities.

The net income of Hong Kong-listed Parkson, which focuses on the Chinese retail business, reached 992 million yuan ($152 million) last year with year-on-year growth of 9 percent.

The retailer opened five new stores in China last year. A surge in Chinese incomes prompted the company to draft an even more ambitious target in the booming market.

"We plan to open 10 to 12 new stores a year in China starting this year, and will penetrate into second-tier and third-tier cities, " Cheng said, adding that a big number of undeveloped Chinese cities will grow rapidly in the next 10 years, providing great business opportunities for the company.

Parkson has also set a growth target of 15 to 20 percent for net profit this year, despite the fact that accelerating expansion may erode its margins.

So far, the company only owns 25 percent of Parkson stores' properties, while the rest are rented. The rising rental costs in the larger cities is adding an extra burden to the company.

Cheng also said Lion Group is in talks with a large steel mill in China to establish a joint venture in Malaysia to tap the steel market in the Association of Southeast Asian Nations, where the steel sector is on a fast-track development.

The joint venture will take advantage of the Chinese firm's big production capacity in special steel and Lion Group's solid presence in Southeast Asia, he said, but refused to disclose the name of the company. "The deal may be reached in two to three months," he said.

The group's steel division has a capacity of 5 million tons a year, and will be extended to 8.4 million tons next year, Cheng said.