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.
Revenue grew at CAGR of 1.70% over the last 5 years. Profit grew at CAGR of 4.60% over the last 5 years. [Contrast this with its very high growth the decade before this, when it was a smaller cap company.]
PBTM averaged 12.7%. The last 2 years PBTM were 15.5% (2022)and 16.2% (2023)respectively.
Its ROE averaged 20.5%. In 2022, it was 17.4% and 2023, it was a high of 21.4%.
Its DPO the last 10 years was 49.7%, retaining about 50% for maintainance and growth of the company.
Its DY in 2023 was 2.91%.
This company is well managed and highly profitable. It has rewarded its long term business owners handsomely.
Padini Holdings Berhad’s (PADINI) 1HFY24 core earnings of RM85.4mn (- 31.9% YoY) came in within ours and consensus estimates at 51% and 50%, respectively.
The group declared its second interim dividend of 2.5sen/share (1QFY24: 2.5sen/share), bringing its YTD dividend to 5.0sen/share (1HFY23: 5.0sen/share) aligned with 1HFY23. QoQ, 2QFY24 core profit surged 109.2% to RM57.8mn in tandem with rise in revenue of 28.8% to RM500.1mn. The better performance in this quarter was attributed to the stronger sales during year-end and festive season (Christmas).
YoY, 2QFY24 core earnings dropped 26.2% YoY while revenue saw a marginal 1.8% decrease. The decline was mainly driven by a higher effective tax rate of 25.1%, up from 24.8% in 2QFY23 (+0.4pts YoY), due to higher non-deductible expenses incurred. 1HFY24 core profit lowered by 31.9% while its revenue remained flat at RM888mn. The weaker YoY performance was due to the higher expenses (staff cost) incurred in 1HFY24, leading to a decrease in GP margin of 2.1pts YoY to 37.2%.
Impact
We maintain our earnings forecast as this juncture, pending analyst briefing on 1 March. Outlook
We expect the 2HFY24 to remain resilient due to Chinese New Year in February and Hari Raya in April, which will boost sales at all Padini’s outlets.
Meanwhile, we reckon the group to sustain its dividend pay-out ratio of c.34% for FY24 while maintaining its net cash position (Net cash stood at RM743.8mn in 2QFY24, representing QoQ improvement of 18.9%).
Valuation
Maintain Buy with a target price of RM 4.40/share based on 15x CY24 EPS.
3 comments:
2014 to 2023
Revenue grew at CAGR of 1.70% over the last 5 years.
Profit grew at CAGR of 4.60% over the last 5 years.
[Contrast this with its very high growth the decade before this, when it was a smaller cap company.]
PBTM averaged 12.7%. The last 2 years PBTM were 15.5% (2022)and 16.2% (2023)respectively.
Its ROE averaged 20.5%. In 2022, it was 17.4% and 2023, it was a high of 21.4%.
Its DPO the last 10 years was 49.7%, retaining about 50% for maintainance and growth of the company.
Its DY in 2023 was 2.91%.
This company is well managed and highly profitable. It has rewarded its long term business owners handsomely.
Its BV per share in 2023 was RM 1.58. With an average ROE of 20.5% and trading at 2.5x its BV, it is priced at a bargain.
At today's price of RM 3.48 per share, its BV of RM 1.65 per share and latest ROE of 16.62%, it is trading at an undemanding P/BV of 2.1x.
Review
Padini Holdings Berhad’s (PADINI) 1HFY24 core earnings of RM85.4mn (- 31.9% YoY) came in within ours and consensus estimates at 51% and 50%, respectively.
The group declared its second interim dividend of 2.5sen/share (1QFY24: 2.5sen/share), bringing its YTD dividend to 5.0sen/share (1HFY23: 5.0sen/share) aligned with 1HFY23.
QoQ, 2QFY24 core profit surged 109.2% to RM57.8mn in tandem with rise in revenue of 28.8% to RM500.1mn. The better performance in this quarter was attributed to the stronger sales during year-end and festive season (Christmas).
YoY, 2QFY24 core earnings dropped 26.2% YoY while revenue saw a marginal 1.8% decrease. The decline was mainly driven by a higher effective tax rate of 25.1%, up from 24.8% in 2QFY23 (+0.4pts YoY), due to higher non-deductible expenses incurred. 1HFY24 core profit lowered by 31.9% while its revenue remained flat at RM888mn. The weaker YoY performance was due to the higher expenses (staff cost) incurred in 1HFY24, leading to a decrease in GP margin of 2.1pts YoY to 37.2%.
Impact
We maintain our earnings forecast as this juncture, pending analyst briefing on 1 March.
Outlook
We expect the 2HFY24 to remain resilient due to Chinese New Year in February and Hari Raya in April, which will boost sales at all Padini’s outlets.
Meanwhile, we reckon the group to sustain its dividend pay-out ratio of c.34% for FY24 while maintaining its net cash position (Net cash stood at RM743.8mn in 2QFY24, representing QoQ improvement of 18.9%).
Valuation
Maintain Buy with a target price of RM 4.40/share based on 15x CY24 EPS.
Source: TA Research - 28 Feb 2024
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