CIMB Research has technical buy on Padini at RM1.42

KUALA LUMPUR (March 29): CIMB Equities Research has a technical buy on Padini Holdings at RM1.42, at which it is trading at a price-to-book value of 3.0 times.

It said on Wednesday the recent consolidation found its support near the 30-day SMA. If the candles can continue to hold on above its recent swing low of RM1.37 over the next few days, the research house expected buying momentum to pick up again.

“Technical landscape is showing signs of improvement. MACD histogram bars are falling at a slower pace while RSI has hooked upward.

“Risk takers may consider taking some position now. However, be quick to cut loss if the RM1.39 low is violated. The next resistance levels are RM1.51, RM1.57 and RM1.60,” said CIMB Research.



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KLCI slips into the red at closing

KUALA LUMPUR (March 13): The FBM KLCI slipped into negative territory in late trade on Tuesday, weighed by losses at select blue chips including banking stocks, MISC and Tenaga as the pullback from Monday did not seem to be over as investors turned cautious.

The FBM KLCI closed 0.73 of a point lower at 1,564.02. Losers beat gainers by 469 to 288, while 329 counters traded unchanged. Volume was 1.16 billion shares valued at RM1.47 billion.

At the regional markets, the Shanghai Composite Index fell 0.19% to 2,434.86. However, Hong Kong’s Hang Seng Index rose 0.97% to 21,339.70, Japan’s Nikkei 225 added 0.09% to 9,899.08, Singapore’s Straits Times Index 0.89% to 2,988.57, South Korea’s Kospi 1.13% to 2,025.04 and Taiwan’s Taiex 1.31% higher at 8,031,51.

European shares gained on Tuesday on hopes German and U.S. data will support rising hopes of an economic recovery ahead of a monetary policy statement by the Federal Reserve, according to Reuters.

Among the decliners on Bursa Malaysia, United PLANTATION []s fell 16 sen to RM24.82, MISC, Tasek, Advanced Packaging, lost 15 sen each to RM5.10, RM8.60 and RM1.30 while Tenaga was down 13 sen to RM6.32.

BLD Plantations and Panasonic lost 12 sen each to RM9.18 and RM22.08, while Padini and Oriental Holdings fell 11 sen each to RM1.45 and RM6.13.

Among banking stocks, Public Bank fell eight sen to RM13.66, BIMB down six sen to RM2.27, Hong Leong Bank four sen to RM12.10, CIMB three sen to RM7.26 and RHB Capital one sen to RM7.79.

Naim Indah Corp was the most active with 176.5 million shares done. The stock fell four sen to 78.5 sen.

Other actives included IFCA MSC, Takaso, Winsun, YTL, HWGB, Silver Bird, and XDL.

Meanwhile, gainers included BAT, Sin Heng Chan, Euro Holdings, TSH, Petronas Chemicals, Tradewinds Plantations and Manulife.



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HDBSVR upgrades Padini’s earnings, TP RM1.75

KUALA LUMPUR (March 12): Hwang DBS Vickers Research has upgraded the earnings for Padini and raised the target price to RM1.75.

It said on Monday that Padini’s store expansion plan for FY12 is more aggressive than it expected.

“As such, we raised our FY12-14F earnings by 6-9%. We also increased same store sales growth assumptions after a strong 1H12 result,” it said.

HDBSVR said Padini is a liquid and cheap proxy to rising affluence (civil servants pay raised recently by 7%-13%) and a resilient Malaysian economy, and hence, deserves premium valuation.

“As such, we raised our target PE to 12x from 10x CY12F EPS, which lifted TP to RM1.75. The company should be able to pay higher dividends (expect 6 sen DPS for FY12F, implying 4.2% dividend yield),” it said.



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Markets gain on successful Greek bond swap

KUALA LUMPUR (March 9): Asian equity markets rose on Friday on improved sentiment on the back of successful attempt by Greece to close the bond swap offer on Thursday.

The bond swap offer was to reduce its huge debt pile and averting a chaotic default that would pitch the euro zone into a fresh crisis, according to Reuters.

BIMB Securities Research in a note Friday said that news on Thursday that Greece had managed to garner almost 90% of its bondholders to swap for new securities filtered through the market thus the broad based gains.

Improved employment outlook in the US provided further positive vibes thus pushing the DJI Average 71 points higher to above the 12,900 mark, it said.

“With Eurozone’s outlook on a stabilisation path, major European bourses ended up mostly in positive territory. “Regionally, there were across the board buying momentum pushing almost all Asian markets up.

“The FBM KLCI made minor inroads with a modest 3.53 point gain to hang around the 1,580 level. We expect the index to see more upside judging by the net inflow of foreign funds into the market over the past two weeks amounting to almost RM1.3bn and may surpass the immediate resistance of 1,585,” it said.

On Bursa Malaysia, the FBM KLCI edged up 2.67 points to 1,581.03 ay 10am, lifted by gains at select blue chips.

Gainers led losers by 234 to 128, while 246 counters traded unchanged. Volume was 339.49 million shares valued at RM196.50 million.

At the regional markets, Japan’s Nikkei 225 rose 1.03% to 9,869.78, Hong Kong’s Hang Seng Index added 0.33% to 20,970.30, the Shanghai Composite Index added 0.43% to 2430.73, Taiwan’s Taiex gained 0.37% to 8,013.72, South Korea’s Kospi was up 0.40% to 2,008.72 and Singapore’s Straits Times Index added 0.07% to 2,972.44.

Among the gainers on Bursa Malaysia, BAT rose 38 sen to RM52.40, Deleum 17 sen, Petronas Gas 14 sen to RM16.92, KLK 12 sen to RM23.38, CIMB, Tenaga and Johore Tin nine sen each to 7.35, 6.35 and RM1.22 respectively, CAB 6.5 sen to 44 sen while Astral Asia and Padini added six sen each to RM1.29 and RM1.54.

Naim Indah Corp was the most actively traded counter with 36.1 million shares done. The stock gained one sen to 64 sen.

Other actives included Sumatec, CSL, SILK Holdings, Olympia, KeyWest and HWGB.

Decliners included Dutch Lady, Petronas Dagangan, Fat East, PPB, Lafarge Malayan Cement, Quality Concrete, Brahim's and Iretex.



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Stocks to watch: Padini, Silver Bird, Pelikan, WinSun

KUALA LUMPUR (March 8): Malaysian stocks could be in for further profit taking on Thursday as the European debt crisis continues to take centre stage in global financial markets .

Key regional markets fell on Wednesday as investors were kept vigilant on the status of Greece’s debt relief scheme. The FBM KLCI fell 0.95% or 15.08 points to finish at 1574.83 points, the biggest one-day decline this year. However, year-to-date, it is up 3%. FBM KLCI futures closed seven points down to 1575.5.

Private holders of Greek government bonds have until Thursday night to voluntarily swap their bonds for new ones. The bond swap is vital to help Greece to obtain bailout funds, without which the country may default on its debt obligations this month. A default could have a negative impact on global financial markets.

Weakness across major importing countries in Europe, and China has already been reflected in Malaysia’s latest trade numbers.

Malaysia’s January exports grew at slower year-on-year pace of 0.4 % as shipments of electrical and electronic and commodity-based products to China and Europe declined. This compares to December 2011’s export growth of 6.1%.

Stocks on watch on Thursday are PADINI HOLDINGS BHD [], SILVER BIRD GROUP BHD [], Pelikan International Corporation Bhd and WINSUN TECHNOLOGIES BHD []. Other stocks which could see trading interest are SYARIKAT TAKAFUL MALAYSIA BHD [] and Brahim’s Holdings Bhd.

AmResearch Sdn Bhd initiated coverage on Padini, an apparel maker with a Buy call and target price of RM1.80. Padini shares closed unchanged at RM1.48 on Wednesday. The stock had earlier traded to a fresh intraday high of RM1.49.

The research house said Padini’s market capitalisation, which is approaching RM1billion, will improve the stock’s visibility among institutional funds. Despite its strong share price performance, Padini’s valuation is undemanding in anticipation of the firm’s earnings growth, according to the research firm.

Bread manufacturer Silver Bird was the third most actively traded stock on Wednesday on speculation that Fraser & Neave Holdings Bhd chief executive officer Datuk Tan Ang Meng may be roped in to lead Silver Bird.

This follows news of alleged financial irregularities at the bread manufacturer. However,Tan has denied the speculation. Silver Bird shares rose 4.5 sen to finish at 23 sen.

Pelikan plans to reward its shareholders with one treasury share for evey 50 existing shares held for FY ended Dec 31, 2011. The board also recommended a final cash dividend of one sen per share single tier dividend.

Industrial automation systems entity Winsun Technologies Bhd secured a letter of intent from Ningbo Shanghao which has indicated its intention to buy from Winsun 60,000 tonnes of iron ore a month for a duration of two (2) years. Winsun shares closed 0.5 sen higher at 17 sen.

Brahim’s whose shares closed 8% higher at RM1.23, announced that it had fixed the issue price for its 17.9 million new placement shares at RM1.10. This translates into gross proceeds of close to RM20 million should all the new securities placed out.

Syarikat Takaful Malaysia Bhd could also draw interest after its managing director Datuk Hassan Kamil indicated the Islamic insurer’s plans to further grow earnings in key market Indonesia for the long term. The stock rose seven sen or 3.3% to close at RM2.18.



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Spotlight on China stocks

Consumer sector
Maintain overweight: The Edge Financial Daily reported on Monday that the recent listing of Chinese companies in Hong Kong at higher price-earnings ratios (PER) may spark a re-rating of China-based stocks listed on Bursa Malaysia. Valuations of these stocks are still cheap.

Right from their IPOs, China-based companies listed on Bursa are trading at huge discounts to their book values (BV) and are at very low PER.

Their weak share price performance is mainly due to investor scepticism of Chinese stocks listed in overseas bourses in view of numerous accounting issues dogging such companies listed in the US and Singapore.

The Chinese companies listed on Bursa are currently trading at extremely cheap PER of about two times.

China Stationery Ltd (CSL), slated to list on Bursa at a PER of around six times, is a China-based integrated plastic stationery company.

Compared with other Chinese companies listed here, CSL’s valuation will be at the higher end of the spectrum.



As such, a re-rating could be in store for the other listed China-based companies if CSL’s IPO is well received, which will bring public attention back to these stocks. Chinese shoe sole manufacturer Multi Sports (“buy”, fair value (FV): RM0.78), which is under our coverage, has been performing steadily and delivering within our estimates.

We are still “overweight” on the consumer sector given its resilient earnings, low beta and decent dividend yields. QL Resources Bhd (“buy”, FV: RM3.62) and Padini Holdings Bhd (“buy”, FV: RM1.42) are our top picks in the consumer space for their solid track records and decent dividend yields. — OSK Research, Feb 13


This article appeared in The Edge Financial Daily, February 14, 2012.



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KLCI edges up at mid-morning, but struggles to sustain early gains

KUALA LUMPUR (Feb 2): The FBM KLCI rose at mid-morning on Thursday, in line with the gains at the key regional markets, but found it hard to sustains its gains.

At 10am, the FBM KLCI was up 7.87 points to 1,529.16, lifted by gains at select blue chips. The index had initially breached the 1,540-level in very early trade.

Gainers led losers by 388 to 188, while 287 counters traded unchanged. Volume was 628.94 million shares valued at RM519.44 million.

At the regional markets, Hong Kong’s Hang Seng Index rose 1.2% to 29,577.00, Japan’s Nikkei 225 added 0.84% to 8,883.94, the Shanghai Composite Index edged up 0.19% to 2,272.28, Taiwan’s Taiex rose 1.15% to 7,635.93, South Korea’s Kospi added 1.42% to 1,987.04 and Singapore’s Straits Times Index was up 0.44% to 2,917.59.

OSK Research director Chris Eng Poh Yoon in his February market outlook on Thursday said the research house’s January Sell call on the FBM KLCI was correct as the market dipped slightly, underperforming almost all major markets in the world.

He said its “Alternative” Top Buys also did well in January with four out of its five Top Buys outperforming the FBM KLCI, namely Supermax, JCY, Old Town and Sarawak Oil Palm

Still, markets performed better than expected and the global rally seems sustained by a flush of liquidity from the Long Term Refinancing Operation (LTRO), he said.

“As such, we are keeping a close eye on the market for the 1st half of Feb. If indeed markets continue to do well, we may be forced to abandon our Bearish stance and upgrade the KLCI to a Neutral with a preliminary year-end target of around 1,600 points.

“To note our 1,466 points current Fair Value will remain intact but it’s a Fair Value not a year-end target,” he said.

Eng said an upgrade would likely see the research house more aggressively promoting the CONSTRUCTION [] and O&G sectors, adding that for now, Consumer stocks are the flavor of the month.

“Top Buys are KPJ, MBSB, QL and Media Chinese as well as Padini which should attract interest as a cheap and good consumer stock,” he said.

On Bursa Malaysia, Petronas Gas added 52 sen to RM16.20, BAT 48 sen to RM49.88, Hartalega 47 sen to RM7.69, Ekovest 21 sen to RM2.96, Kretam and Petronas Dagangan 20 sen each to RM2.55 and RM18.30, Malayan Flour Mills 17 sen to RM4.50, United PLANTATION []s 16 sen to RM20.50, IJM Corp 14 sen to RM5.88 and Lafarge Malayan Cement up 12 sen to RM6.80.

Tebrau Teguh was the most actively traded counter after a takeover offer made by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is offering 76 sen per share – or just one sen above Tebrau’s pre-suspension price of 75 sen.

The stock rose eight sen to 83 sen with 40.7 million shares done.

Other actives included Coastal Contracts, DRB-Hicom, DBE Gurney, UEM Land, Petronas Chemicals, Mudajaya and Jotech.

Decliners included Tahps, Dutch Lady, Melewar, Southern Steel, MPI, Ajinomoto, Glenealy and BHIC.



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Domestic spending lifts retailer earnings

Despite prevailing external uncertainties, there appears a consensus among market observers that domestic consumption will remain comparatively resilient. This expectation is predicated on several factors, including the country’s relatively low unemployment rate. A higher degree of job security means that consumers would be more inclined to spend.

The new remuneration scheme for the country’s 1.4 million civil servants, effective January this year, will raise salaries by between 7% and 13%. The pay rise should also indirectly raise income levels for those working in the private sector. In addition, the government is handing out cash to students and low-income households. Coupled with expectations that inflation has peaked, rising disposable incomes are expected to be supportive of consumer spending going forward.

The Retail Group Malaysia recently forecast sales growth of 6% this year, just slightly lower than that estimated for 2011. Indeed, retailers in the country have been chalking up robust sales in the last two quarters.

Strong y-o-y growth in 3Q11 for Padini and Bonia
Padini reported 30% year-on-year (y-o-y) sales growth in 3Q11 to RM178.1 million while net profit was up 47% y-o-y to RM26.9 million. The company attributed the strong growth to higher spending during the Mega Sale period as well as the Hari Raya Aidilfitri celebrations.

Top line sales were also boosted by Padini’s move to focus on its Brands Outlet, a value-for-money concept store targeted at the mid- to lower-income households. The store carries the company’s lower end in-house brands as well as a wide range of consignment brands. The comparatively affordable pricing generates greater volume sales. Even though product margins are thinner, the higher sales volume, simpler store design and larger space translate into economies of scale and overall cost savings.




Clearly, the strategy is working. Padini opened three new Brands Outlets in its last financial year ended June 2011, bringing the total to 13 — even as it streamlined its network of standalone stores from 50 to 45.

Overall gross floor area expanded by some 7.6% while total sales grew at a slightly faster pace of 9.6% in the last financial year. Looking ahead, the company is planning more Brands Outlets as well as the larger concept stores.

Similarly, Bonia reported strong sales growth of 49% y-o-y to RM152.2 million in 3Q11, the first quarter of the company’s financial year ending June 2012. To be sure, the numbers are not directly comparable as sales in 1QFY12 were boosted by contributions from subsidiary, Jeco Group, which was acquired in late December 2010. Still, stripping this out, the company’s sales are estimated to have expanded in the low double digits. Net profit doubled to RM20 million from the previous corresponding quarter.

While Padini has remained focused on its homegrown brand names and branching out into the lower income market segment, Bonia is adopting a different growth strategy. The company’s acquisition of Jeco means that it now complements its own brand names with international labels such as Renoma, Pierre Cardin, Bruno Magli and Braun Buffel.

Most recently, Bonia announced the acquisition of a 49% stake in Braun GmbH and Braun KG, the Germany-based owner of the Braun Buffel brand name, for some RM13 million. The purchase will allow the company to expand its geographical rights to market leather products and accessories under the brand name.

Upcoming 4Q11 results expected to be positive
Sales in 4Q11 are expected to remain robust, with the traditionally strong year-end spending bolstered by an early Chinese New Year. Thus, we would expect the upcoming 2QFY12 earnings results for Padini and Bonia to be positive.

One of the biggest risk factors for retailers is if the domestic economy turns out to be weaker than expected and consumers pull back on their spending. This could happen if the crisis in the eurozone takes a turn for the worst, buffeting financial markets and straining the fragile recovery in the US.

Slower volume sales translate into higher stock obsolescence and narrower margins given that the retail industry has a relatively high fixed cost structure.

Offering larger discounts to drive top line sales would on the other hand dampen profitability.

On balance though, we believe the global economy is in fairly good shape at the moment, albeit expected to grow at a slower pace.

Both stocks trading at modest valuations
Coming off an expected strong 1HFY12, sales and earnings in the second half of the financial year for both Padini and Bonia are likely to be slower in the absence of major festive celebrations. Nonetheless, sales and earnings for FY12 should still register positive growth from the previous year. Both stocks are currently trading at fairly decent, single-digit forward price-earnings ratios.

Based on our earnings forecast, the companies are expected to maintain their dividends at least. Padini paid net dividends totalling four sen per share while Bonia’s gross dividends totalled five sen per share in FY11. The former is sitting on net cash totalling some RM89.6 million. Bonia had net cash of RM12.4 million as at end-September 2011, before taking into account the latest acquisition of the stake in Braun Buffel.


Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.


This article appeared in The Edge Financial Daily, January 18, 2012.



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It is not just the yield appeal

Consumer sector
Maintain neutral: Amid expectations of slower domestic consumption into 2012, we are overall “neutral” on the consumer space. Positively, this sector comprises resilient companies with strong balance sheets and strong cash flows.


Dividend yields are decent and average 4% across the sector for 2012, while capital management remains an ongoing theme. It is for these very reasons, however, that consumer stocks had significantly outperformed the FBM KLCI in 2011, and current valuations are fair, with the sector trading at a 2012 PER of 15.8 times.

Within the consumer sector, there are pockets of interest, retail being one of them.

While 2012 is likely to be a challenging year, our two stocks in this segment, Padini Holdings Bhd and Aeon Co (M) Bhd are likely to outperform their peers, in our view, due to strong management, their responsiveness to customer needs and strong balance sheets.

Padini’s move into Brands Outlets provides it with a whole new clientele base while Aeon’s property management division provides it with stable recurring earnings.

We have a “buy” on QL Resources Bhd for its strong earnings growth ahead, emanating primarily from its Indonesian operations. We are nevertheless “neutral” on MSM Malaysia Holdings Bhd and Beras Nasional Bhd due to price control issues that cloud their near-term outlook.

Tobacco and brewery stocks had significantly outperformed the FBM KLCI in 2011.

Tobacco and brewery stocks had significantly outperformed the KLCI in 2011. Capital management is likely to be an ongoing theme that will sustain interest in all four stocks but valuations are fair in our view. The tobacco stocks trade at a 2012 PER of 15.8 times while the brewers trade at 17.5 times. With the recent run-up, we downgrade Carlsberg Brewery (M) Bhd and Guinness Anchor Bhd to “hold” from “buy”.

We have two great companies in this category — Nestle (M) Bhd and Fraser & Neave Holdings Bhd (F&N). Trading at average 2012 PER of 23.1 times with average net yield of just 3.3%, we see little reason to own Nestle at this stage while F&N’s near-term outlook is clouded by potentially stiffer competition from Coca-Cola and Permanis Sdn Bhd. — Maybank IB Research, Jan 5



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OSK overweight on consumer sector

Consumer sector
Maintain overweight: Although we expect the tepid economic scenario in 2012 to dampen earnings, we believe consumer companies will fare better than average, mainly due to the firm demand for their products and the fact that these companies have taken the appropriate measures and learned from the last crisis in 2008/09.

During the last crisis, most consumer companies’ top and bottom lines still registered double-digit growth, fuelled mainly by promotions that spurred consumer spending and internal cost saving. Despite the heavy discounting and promotions and new opening expenses, most retail companies reported better if not flat margins from FY08 to FY10.

The same applies to food and beverage (F&B) companies, although food commodity prices spiralled upwards only after the crisis.


We expect consumer spending to remain relatively stable as disposable income increases with the country’s low unemployment of 3%. Strong retail sales amid an environment of weak consumer sentiment during the last crisis showed that retail sales are not necessarily affected by consumer sentiment, as long as unemployment remains low. Although Malaysia’s household debt-to-GDP ratio is relatively high at 76%, the overall household balance sheet remains sound.

Given that food and beverage demand is expected to be firm and sales resilient, the financial performance of F&B companies will depend mainly on the fluctuations in food commodity prices and their ability to keep manufacturing costs low.

As economic conditions deteriorate, we expect prices to decline further, although they are unlikely to go back to their previous lows. In the event food commodity prices stay high, F&B companies would not be substantially affected given their ability to cope with the high raw material costs post the 2008/09 crisis, as well as a stronger US dollar against the ringgit.

Given our view that the share market should weaken in the near term due to global economic headwinds, the consumer sector — known for its resilient earnings, low beta and decent dividend yields — will be among the safer bets. Hence, we maintain overweight on the consumer sector.

QL Resources Bhd (“buy”, fair value: RM3.62) is our favourite stock for its uninterrupted earnings growth in the past 20 years and rising operating profit margins since 2004. We also like Padini Holdings Bhd’s (“buy”, FV: RM1.42) attractive valuation and good dividend yield. — OSK Research, Dec 27



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QL Res, Padini are OSK's consumer top picks

OSK Research said consumer companies will fare better than on average, despite the tepid economic scenario in 2012, which is expected to dampen earnings.

In a research note today, OSK Research said this was mainly due to firm demand for their products, and the fact that the companies had taken appropriate measures while having learnt from the last crisis in 2008/09.

The research company also expects consumer spending to remain relatively stable as disposable income increases, amid the country's low unemployment of three per cent.

"The financial performance of food and beverage (F&B) companies depends mainly on fluctuations in food commodity prices and their ability to maintain low manufacturing costs," it said.

OSK Research is maintaining its overweight recommendation on the consumer sector, with its top picks being QL Resources Berhad, for its uninterrupted earnings growth, as well as Padini Holdings Bhd, for attractive valuation and good dividend yield. -- Bernama



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Padini shows strong earnings momentum

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.



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Padini Holdings: The clothes maketh the brand

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.