The company said in a Bursa Malaysia filing that revenue grew 20.71% to RM342.36mil, boosted by new stores including an additional five Padini Concept and eight Brands Outlet stores.
KUALA LUMPUR: AmInvestment Bank Research is keeping its Buy recommendation on Padini Holdings with a higher fair value of RM2.70 a share.
It said on Thursday this was a 20 sen higher than the previous fair value of RM2.50 as it rolls forward its valuation base from FY16F to FY17F. Target price-to-earnings (PE) remains unchanged at 13 times.
“Padini maintained its strong growth momentum to post another record quarter of earnings. The group reported net profit of RM35mil for 3QFY16 (on-quarter: +6%; on-year: +32%) to extend its 9MFY16 earnings to RM100mil (on-year: +61%).
In view of its sterling performance, the group declared a special dividend of 1.5 sen a share on top of its usual 2.5 sen a share interim. The total for dividends announced thus far is 11.5sen a share and this translates to an attractive yield of 5%.
The group’s revenue expansion continues to be spearheaded by Padini Concept Stores and Brands Outlet following a successful change in its pricing policies and merchandising strategies.
Same store sales growth (SSSG) was 18% for the former and 9% for the latter in 3QFY16. This is the opposite direction of other retailers which have been experiencing negative SSSGs.
AmInvestment Research said Padini’s gross profit margin of 42% for 3QFY16 and 9MFY16 was a tad lower compared to 3QFY15’s 44% and 9MFY15’s 43%.
“This is not surprising as the higher merchandise costs from a weaker Ringgit in 1HFY16 begin to flow through. Nonetheless, its EBIT margin had held steady on-quarter and increased two percentage points on a nine-month basis as revenue growth outstripped that of operating expenses.
Year-to-date, the stock has performed well. Despite its share price appreciation, Padini’s valuation remains undemanding.
“Besides its undemanding valuations and decent yields, we like Padini for: (1) its strong brand value; (2) robust earnings growth; (3) wide distribution network; and (4) dominant position in the retail segment which will be key in capturing the normalisation of spending patterns,” said the research house.
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