• Direct beneficiary of uptick in consumer spending
We recently hosted a corporate presentation by Padini Holdings (Padini),
a well-established retailer of fashion apparel and footwear, and came
away with a positive medium-term outlook on the company. Strong brand
recognition and large nationwide store network place Padini in favourable
position to capitalise on any strengthening consumer sentiment and
spending.
• Padini Corp and Vincci Ladies continue to lead
Padini Corp and Vincci Ladies are the most significant subsidiaries in
Padini Group, together constituting 70% of FY10 group revenue and 84%
of pretax profit. Padini-branded clothing and footwear with the Vincci label
have consistently resonated with Malaysian consumers thanks to the
group’s effective merchandising strategy.
• Extending ‘Brands Outlet’ store network
The group is expanding its value proposition ‘Brands Outlet’ stores in
response to positive reception by shoppers and to expand its store
network to urban areas beyond the highly saturated Klang Valley. There
are currently 11 ‘Brands Outlet’ stores that account for 27% of the group’s
total retail floor space.
• Potential for dividend upside
Given Padini’s minimal capex requirements in the 2-year forward forecast
period, we believe that the company could pay out higher dividends than
the 15.0 sen DPS in FY10 (or 32% dividend payout ratio).
• Fair value of RM5.33
Utilising a target P/E of 10x applied to CY11 EPS of 53.3 sen, we arrive at
a fair value of RM5.33. Our target P/E is based on a 2x premium to Bonia
Corp, Padini’s closest comparable. We believe that Padini deserves to
trade at higher valuations because it has a larger store network and
higher margin product mix (with larger proportion of fashion apparel).
Target P/E is lower than Padini’s 12-year historical average P/E of 11.7x
(FY99-FY10) however, as we anticipate moderation in earnings growth
moving forward. We have projected a 3-year net profit CAGR (FY10-12) of
6.4%. Our fair value indicates a potential 9% upside to current share
price.
http://www.ecmmoney.com/wp-content/uploads/downloads/2010/12/PAD_101221_Non-rated.pdf
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Wednesday 22 December 2010
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