Friday 29 Mar 2024
By
main news image

Padini Holdings Bhd
(Feb 17, RM1.44)

Maintain hold call with a lower target price (TP) of RM1.57.
We revise downward our earnings forecast for the financial year ending June (FY15F) by 12.7% and for FY16F by 10% to account for the lower-than-expected margin.

Padini’s net profit for the first six months (1H) of FY15 was 36.8%, lower than a year earlier despite revenue being 4.6% higher year-on-year, as continued aggressive promotions and discounting activities weighed on earnings.

As such, operating profit margin in 1HFY15 narrowed by 6% to 11% from 17% a year ago.

We expect the group to continue its aggressive promotional activities amid a challenging retail environment to gain market share.

The group’s net profit has fallen by 15.8% quarter-on-quarter, in contrast with our earlier expectation of resilient sequential earnings as we had expected the year-end holiday shopping season and shopping spree for Christmas to support earnings momentum in the second quarter ended December 2014.

The key culprit for the earnings disappointment would be the aggressive promotional activities coupled with an increased clearance of slow-moving stocks.

The group sees an urgency in  clearing its slow-moving stocks ahead of the implementation of the goods and services tax (GST) in April though GST on sale of such stocks will be absorbed by the group instead of being passed on to consumers. The group has declared a net dividend of 2.5 sen per share, which will go ex on March 4.

We expect the group to maintain a dividend payout of 10 sen per share in FY15, which would translate a into decent dividend yield of 6.8%. — JF Apex Securities Research, Feb 17

padiniholdings_10_bc


This article first appeared in The Edge Financial Daily, on February 18, 2015.

      Print
      Text Size
      Share