KUALA LUMPUR (Feb 27): Fashion retailer Padini Holdings Bhd saw its share price fell by 20 sen or 3.74% to RM5.15, making it one of the top losers across Bursa Malaysia this morning, after announcing weaker earnings for the second quarter ended Dec 31, 2017 (2QFY18).

At 10.40am, about 286,900 shares valued at RM3.52 billion were traded over its counter.

In 2QFY18, Padini reported an 8.27% year-on-year drop in net profit, from RM54.47 million to RM49.97 million, on a decrease in gross profit margin in response to the market environment.

It quarterly revenue, however, was up 7.92% at RM460.43 million against RM426.65 million, due to increased number of outlets — which has increased by four Padini Concept stores and six Brands Outlet stores opened during the six months ended Dec 31, 2017 (1HFY18), said Padini in a filing to Bursa Malaysia yesterday.

At the same time, the group declared a third interim dividend of 2.5 sen per share for the financial year ending June 30, 2018, payable on March 29.

For 1HFY18, Padini's net profit was 2.29% lower at RM81.19 million versus RM83.09 million a year ago. Its revenue was 5.28% higher at RM775.61 million, from RM736.68 million last year.

In a note review today, MIDF Research anticipates the outlook for the group to remain challenging in the coming quarters due to increasing competition in the local fashion segment.

"Nevertheless, the additional [planned] opening of 12 new stores locally and three outlets in Cambodia in FY18 will sustain growth trajectory," said its analyst Nabil Zainoodin.

The research house has maintained "neutral" recommendation on the counter with an unchanged target price of RM4.77.

"Our target price changes as we rolled forward our valuation based to FY19F with a PER of 15.5 times pegged to EPS19 of 30.8 sen.

"We view that the valuation is currently stretched at this juncture with a forward PER of close to 20 times in comparison to the average historical two-year PE of 15 times," he added.