Padini Holdings Bhd (Nov 4, RM1)
Initiating coverage with buy at target price RM1.40: Padini is one of the country’s most profitable retail companies with seven main brands, catering for virtually all segments of the local market, making it a resilient proxy to the retail industry.
It had an estimated brand value of RM244.7 million (37 sen per share) and figured consistently in Malaysia’s Top 30 Brands from 2007 to 2009. The group derives revenue from 45 single brand stores (23% of FY11 revenue), 22 multi-brand concept stores (43%), 140 consignment counters in various department stores (13%) and 13 Brands outlets (10%) based on our estimates.
Padini’s Brands Outlet — which focuses on high-volume fast-selling garments at low prices — has been its main revenue growth driver (+85% compound annual growth rate (CAGR) over FY07 to FY11).
We expect this trend to continue in the near term, in line with the group’s growth strategy to venture into captive markets (townships and isolated areas) that lack mainstream fashion outlets.
Sales of other brands should remain resilient, buoyed by rising affluence, attractive pricing and fashionable products. For FY12, we expect Padini to open three Brands Outlets, one multi-brand concept store, and three single brand outlets in selected shopping malls.
At its current price, Padini is cheaper than its peers, trading at a 45.6% (7.4 times) discount to its CY12 average (13.6 times). Earnings per share (EPS) has grown 48% (four-year CAGR) from FY07 to FY11 with a clean, net cash balance sheet.
Return on equity (ROE) will be attractive over the next few years at 23% to 28%, having improved from 24% (FY06) to 29% (FY11). Padini paid out at least 30% of profit as dividends over the last three years, peaking at 49% of net earnings in FY10 (about 4% dividend yield).
We initiate coverage with a RM1.40 target price pegged to 10 times CY12 EPS of 13.6 sen, driven by growth in Padini’s value segment and expanding tourism and retail sectors. — Hwang DBS Vickers Research, Nov 4
This article appeared in The Edge Financial Daily, November 8, 2011.
Initiating coverage with buy at target price RM1.40: Padini is one of the country’s most profitable retail companies with seven main brands, catering for virtually all segments of the local market, making it a resilient proxy to the retail industry.
It had an estimated brand value of RM244.7 million (37 sen per share) and figured consistently in Malaysia’s Top 30 Brands from 2007 to 2009. The group derives revenue from 45 single brand stores (23% of FY11 revenue), 22 multi-brand concept stores (43%), 140 consignment counters in various department stores (13%) and 13 Brands outlets (10%) based on our estimates.
Padini’s Brands Outlet — which focuses on high-volume fast-selling garments at low prices — has been its main revenue growth driver (+85% compound annual growth rate (CAGR) over FY07 to FY11).
We expect this trend to continue in the near term, in line with the group’s growth strategy to venture into captive markets (townships and isolated areas) that lack mainstream fashion outlets.
Sales of other brands should remain resilient, buoyed by rising affluence, attractive pricing and fashionable products. For FY12, we expect Padini to open three Brands Outlets, one multi-brand concept store, and three single brand outlets in selected shopping malls.
At its current price, Padini is cheaper than its peers, trading at a 45.6% (7.4 times) discount to its CY12 average (13.6 times). Earnings per share (EPS) has grown 48% (four-year CAGR) from FY07 to FY11 with a clean, net cash balance sheet.
Return on equity (ROE) will be attractive over the next few years at 23% to 28%, having improved from 24% (FY06) to 29% (FY11). Padini paid out at least 30% of profit as dividends over the last three years, peaking at 49% of net earnings in FY10 (about 4% dividend yield).
We initiate coverage with a RM1.40 target price pegged to 10 times CY12 EPS of 13.6 sen, driven by growth in Padini’s value segment and expanding tourism and retail sectors. — Hwang DBS Vickers Research, Nov 4
This article appeared in The Edge Financial Daily, November 8, 2011.
