The fashion retailer's 1QFY21 net profit of RM20.7mil was up 6% year-on-year was within expectations at 17% and 18% of Kenanga's and consensus full-year estimates.
However, there was no dividend payout, which was below expecations.
According to Kenanga, Padini's financial first quarter historically takes up 15% of full-year earnings while its financial second quarter is seasonally stronger due to festive demand.
"This is further supported by the group’s strong brand equity locally, which could allow it to capture a greater share of the down-traders amid the current economic uncertainties, mainly through its focus on the value-for-money segment (via Brands Outlet and Padini)," it said.
The research house reiterated its "outperform" recommendation on the stock with an unchanged target price of RM2.90 based on an ascribed FY21 price-earnings of 16x.
It believes the stock deserves to trade at a premum due to anticipation of a robust recovery in FY21 post-lockdown, which could drive 58% growth in earnings per share from a low base in FY20, as well as a solid net cash positon of about RM505mil.
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