PADINI (7052)

Padini, SEED, Vincci are another great homegrown brands created by PADINI Holdings. Seriously i like their product especially SEED and Padini as their quality is comparable with foreign fashion brand such as TopMan, G2000 and Zara, well when its comes to fabric, i think ZARA is slightly more comfortable to wear.

Anyway, unlike Bonia, Padini offers more product range to cater different segment & target of consumer.

Padini managed to grow an impressive earning from just RM7.02 million in FY2004 to RM60.75 million in FY2010. Ok, enough about the past, lets look at their latest result Q1FY2011, net profit & revenue dropped by -8.9% and -2.91% respectively. This is the second times Padini posted a negative sales growth YoY since FY2004, the first time was Q2 FY2010. At first i thought Padini has lost thier touch but after reading their press release, i dont think they already hit the ceiling just yet. The management also mentioned that they will open at least 3 new Brand Outlet stores this financial year.

"The reduction in Revenues could be attributed to the shorter Hari Raya Aidilfitri shopping season of 2010. In 2009, Ramadan ended on 19^th September, whereas in 2010, the month ended on 9^th September. The relatively larger decline in Profit before Taxation however had resulted from increased expenses arising out of an expanded distribution network. In the 12 months ended 30^th September 2010, the Group had opened 7 new outlets, closed 2, and added nearly 62,000 square feet to the gross floor area for retailing in Malaysia. As awareness for the new stores improves, we expect sales revenues to rise and contribute to future profitability."

Back to valuation, Padini Holdings balance sheet is extremely healthy with strong cash flow, so it's no surprise that they will reward a higher dividend or at least the same yield as last year. The company trading at current PE 13.2, but looking at rising consumerism in Malaysia (their store always pack with customer) i believe they could grow their earning, by at least RM 65~70 million, giving a conservative growth of 8~14%. Well, their lowest profit growth was 14.6% in FY2007. by implying 14% growth, i think its already safe enough. At RM70million,` RM1.18 the company is valued at annualized PE of 11.1 with EPS of 10.64. By implying PE10, i think its safe to buy ~ RM1.05. Plus, dividend also attractive at ~4% & ICapital also hold significant amount of shares in this company.