PADINI – Fundamental Analysis (1 Dec 2015)

Fundamental Analysis as of FY15 – http://www.slideshare.net/lcchong76/padini-fundamental-analysis-fy15

Excel – http://1drv.ms/1Il3FSe

Latest Financial – Q1 2016 Financial Report (26 Nov 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4932481

Peer Comparison – http://www.slideshare.net/lcchong76/apparels-peer-comparison

FY16 Q1 Results Highlight:

  • Year-on-year, revenues for the quarter under review have risen by 19% (RM42.8million), this increase was driven mainly by both our Padini Concept Stores and Brands Outlet Stores. Since the end of the previous year’s corresponding quarter, 4 more Padini Concept Stores and 4 more Brands Outlet stores, covering a total gross floor area of about 117,000 square feet have been added to the Group’s overall retail network, and these new stores have contributed significantly to the overall increase in revenues.
  • Additionally, the Padini Concept Stores have also recorded very strong same stores sales growth for the quarter (23%), and together with the sales from the new stores mentioned earlier, drove the increase in revenues. The very much improved performance from the Padini Concept Stores can be attributed to a change in pricing policies and merchandising strategies employed which have resulted in driving better value and improved merchandise selections. This had in turn made our product offerings and prices more attractive, resulting therefore in better turnovers.
  • The Hari Raya Aidilfitri festive season that fell in the quarter under review had given revenues a big boost.
  • The strong absolute showing from the Padini Concept Stores had resulted in better gross margins since the products sold in such stores traditionally commanded higher mark-ups. Given the better performances all round, and the smaller increase in operating expenses relative to the increase in revenues, the profits before tax for the quarter jumped 65.7% year-on-year from RM26.7 million to RM44.3 million.

Valuation:

  • Absolute EY%:
    • Historical
      • Trailing:
        • FY15 (EPS: 0.122) – 1.703 (Uncertainty Risk: HIGH)
        • R4Q (EPS: 0.141) – 1.970 (Uncertainty Risk: MEDIUM)
      • Forward:
        • FY16 (EPS: 0.148 ± 5%) – From 1.968 to 2.175 (Uncertainty Risk: MEDIUM)
        • FY17 (EPS: 0.159 ± 5%) – From 2.110 to 2.332 (Uncertainty Risk: LOW to MEDIUM)
      • EPS applied to reach the current stock price (1.73): 0.124
    • Industry
      • Trailing:
        • FY15 (EPS: 0.122) – 1.78 (Uncertainty Risk: HIGH)
        • R4Q (EPS: 0.141) – 2.06 (Uncertainty Risk: MEDIUM)
      • Forward:
        • FY16 (EPS: 0.148 ± 5%) – From 2.06 to 2.28 (Uncertainty Risk: LOW to MEDIUM)
        • FY17 (EPS: 0.159 ± 5%) – From 2.21 to 2.44 (Uncertainty Risk: LOW)
  • In my opinion, fair value of PADINI range from 1.7 to 2.3. Uncertainty risk of fair value is from LOW to MEDIUM.

PADINI-FY16-Q1-Football

Going Forward:

In my opinion, PADINI’s current valuation is very attractive. Its high dividend yield help cushion market dips. I still cautious on Padini’s near-term earnings outlook due to risks of lower margins and profits from absorbing the GST amid the weakening consumer sentiments. I will continue to hold and accumulate this stock.

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

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