Padini Holdings Bhd (Nov 30, RM1.06)
Maintain buy with unchanged target price of RM1.16: Padini’s 1QFY12 earnings were strong with net profit of RM27 million, up 47% year-on-year (y-o-y) (+49% quarter-on-quarter [q-o-q]).
Although above our expectation (1Q is typically a strong quarter), we maintain our forecasts on anticipation that sales could moderate into 2HFY12 on the back of slower domestic consumption.
For its strong retail presence and increasingly resilient earnings model through its Brands Outlets, Padini remains a “buy” with an unchanged target price of RM1.16 based on a CY12 price-earnings ratio (PER) of 9.2 times.
Revenue recorded a new high of RM178 million in 1QFY12, which translates into y-o-y and q-o-q growth of more than 30%.
While this was within our expectation, the improvement in earnings before interest and tax (Ebit) margin surprised us on the upside.
The group’s 1QFY12 gross profit margin declined by 3.6 percentage points (ppt) y-o-y to 49.4% as higher cotton prices since the start of CY10 continued to put pressure on its cost of goods sold.
Despite this, Ebit margin improved 2ppt y-o-y to 20.6% due to increased efficiency in merchandising.
Overall, 1Q net profit accounted for 34% of our full year forecast and 33% of consensus.
New stores drive revenue growth. While q-o-q revenue growth was driven by festivals, y-o-y revenue growth was due to store expansion in the past 12 months.
From October 2010 to September 2011, the group has opened four Brands Outlet stores and two Padini Concept Stores.
The sales of own products in the Brands Outlet stores rose 86% y-o-y to contribute about 15% to total revenue in 1QFY12 against 11% in 1QFY11, while the Brands Outlet stores now contribute to about 20% of group revenue.
There will be one Padini Concept Store and one Brands Outlet each in The Paradigm (Kelana Jaya) and Setia City Mall (Shah Alam) by end-CY12.
Presence at the Johor Premium Outlet (to open on Dec 11) will also enhance its market reach to tourists travelling between Singapore and Malaysia. — Maybank IB Research, Nov 30
This article appeared in The Edge Financial Daily, December 1, 2011.
Maintain buy with unchanged target price of RM1.16: Padini’s 1QFY12 earnings were strong with net profit of RM27 million, up 47% year-on-year (y-o-y) (+49% quarter-on-quarter [q-o-q]).
Although above our expectation (1Q is typically a strong quarter), we maintain our forecasts on anticipation that sales could moderate into 2HFY12 on the back of slower domestic consumption.
For its strong retail presence and increasingly resilient earnings model through its Brands Outlets, Padini remains a “buy” with an unchanged target price of RM1.16 based on a CY12 price-earnings ratio (PER) of 9.2 times.
Revenue recorded a new high of RM178 million in 1QFY12, which translates into y-o-y and q-o-q growth of more than 30%.
While this was within our expectation, the improvement in earnings before interest and tax (Ebit) margin surprised us on the upside.
The group’s 1QFY12 gross profit margin declined by 3.6 percentage points (ppt) y-o-y to 49.4% as higher cotton prices since the start of CY10 continued to put pressure on its cost of goods sold.
Despite this, Ebit margin improved 2ppt y-o-y to 20.6% due to increased efficiency in merchandising.
Overall, 1Q net profit accounted for 34% of our full year forecast and 33% of consensus.
New stores drive revenue growth. While q-o-q revenue growth was driven by festivals, y-o-y revenue growth was due to store expansion in the past 12 months.
From October 2010 to September 2011, the group has opened four Brands Outlet stores and two Padini Concept Stores.
The sales of own products in the Brands Outlet stores rose 86% y-o-y to contribute about 15% to total revenue in 1QFY12 against 11% in 1QFY11, while the Brands Outlet stores now contribute to about 20% of group revenue.
There will be one Padini Concept Store and one Brands Outlet each in The Paradigm (Kelana Jaya) and Setia City Mall (Shah Alam) by end-CY12.
Presence at the Johor Premium Outlet (to open on Dec 11) will also enhance its market reach to tourists travelling between Singapore and Malaysia. — Maybank IB Research, Nov 30
This article appeared in The Edge Financial Daily, December 1, 2011.
