PADINI – Fundamental Analysis (17 Feb 2015)

PADINI Analysis:-

Excel – http://1drv.ms/1BibDau

Notes – http://tinyurl.com/lyevtd9

My View:-

  • Valuation:
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.138) – Fair value 1.84 (Fair Value Uncertainty: MEDIUM)
        • R4Q (EPS: 0.107) – Fair value 1.42 (Fair Value Uncertainty: HIGH)
      • Forward:
        • FY15 (EPS: 0.129) – Fair value 1.72 (Fair Value Uncertainty: MEDIUM)
        • FY16 (EPS: 0.151) – Fair value 2.02 (Fair Value Uncertainty: MEDIUM)
      • EPS applied to reach the current stock price (1.47): 0.11
  • Assuming PADINI dividend payout is consistent, I think dividend yield is around 9%.
  • In overall, PADINI valuation is quite attractive.
  • FY15Q2 result is mediocre due to few non-recurring issues/activities. These issues/activities will impact PADINI 2-3 quarters, but for me, these are short term problems. No big deal.
    • Revenues from domestic franchisees were substantially reduced following a decision by the Group to replace the franchise arrangements with ‘manage and operate’ agreements.
    • Gross margins earned in the quarter reviewed had fallen by about 6% year-on-year, reflecting continued aggressive promotional and discounting activities, and increased clearance of slow-moving stocks. Clearance of slow-moving stocks had taken on an urgent priority as it was almost certain that post-GST, disposal of such stocks would result in an even greater negative impact on margins since the GST on the sale of such stocks would be absorbed by the Group instead of being passed on to the consumers.
      • If PADINI didn’t do this, these stocks will end up in "Inventories Written Off" in the future.
      • So, in my opinion, I support PADINI actions.
  • Besides FCFF in FY15 Q2 increased 165% if compare to the previous corresponding period. (25,580 FY14 Q2 –> 67,556 FY15 Q2). This is the reason why I believe PADINI dividend policy is sustainable
  • I will continue to hold, and accumulate PADINI if possible.

Latest Financial – Q2 2015 Financial Report (16 Feb 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1878877

At the time of writing, I owned shares of PADINI.

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3 thoughts on “PADINI – Fundamental Analysis (17 Feb 2015)

  1. With weaker result quarter on quarter, I think FY2015 full year EPS will be weaker. Past history show 2nd half result is weaker compared to 1st half, I therefore doubt if Padini will be able to pay the same dividend of 10 sen for 2015. Retail fashion is very competitive, with H&M and Uniqlo competing for market share. Brand outlet looks like the only segment that is showing growth, a good 20%. I think for valuation, it is fair to look at the latest dividend of 10 sen, or the projected dividend for the full 2015, which I think at best will be 8 sen. At 8 sen, the DY would be 5.7%. Decent, but with the highly competitive industry as a backdrop, and some evidence that padini is losing out to new players, on top of high no of institutional investors, who knows, price may come down further???

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