Maintain HOLD
3QFY6/16 results beat estimates whereby sales were driven by strong organic growth and
new stores. While a fourth interim net DPS of 2.5sen was in line, a 1.5sen special net DPS
came as a surprise. We increase FY16-18 earnings by 4-10%. Our higher TP of MYR2.30
(+30sen) is pegged to 11x FY17 PER (from 10.5x CY16 PER).
Strong topline growth
3QFY16 net profit was MYR35.1m (+32% YoY, +6% QoQ), bringing 9MFY16 net profit to
MYR100.0m (+61.2% YoY) and accounting for 83%/91% of our/consensus’ FY16 estimates.
3QFY16’s YoY earnings were driven by: (1) strong organic growth whereby same-store s
ales growth (SSSG) was +18% and +9% at Padini Concept Store and Brands Outlet
respectively; and (2) contribution from new outlets as Padini had opened 13 new stores
in 9MFY16. Meanwhile, we also believe the seasonally stronger 3QFY16 was lifted by the
Chinese New Year shopping season and Padini’s affordable merchandise pricing and
aggressive year-round promotions.
Increase earnings forecasts and TP
We revise FY16/17/18 net profit forecasts by +10%/+4%/+6% following our key assumption
adjustments (i.e. revenue and opex). Consequently, we increase our TP by 30sen to MYR2.30
pegged to 11x FY17 PER (from 10.5x CY16 PER). Our 11x peg is at 1-year forward PER mean
and we believe it is fair premised on current soft consumer sentiment and intense competition
in the fashion retail industry.
Hari Raya shopping impact in 4QFY16
We expect sales volume to seasonally ease in Apr-May 2016 before the pre-Hari Raya shopping
season takes place in Jun 2016 (one month earnings impact in 4QFY16). Nonetheless, we
believe near-term earnings growth would be supported by sustained organic growth and
new outlets as Padini has identified at least four new outlets to be opened in FY17.
Source:
Maybank Research - 19 May 2016
5）
Padini Holdings Berhad - On Track to Make History
Author: kiasutrader |
Publish date: Thu, 19 May 2016, 09:50 AM
9M16 net profit of RM100.0m (+61.2% YoY) beat our (96%) and market (91%)
expectations due to higher-than-expected profit margins. FY16 DPS of 11.5 sen
is within our expectation. Earnings forecasts upgraded by 19.7%-26.3% after
assuming higher profit margin. Upgrade to Outperform (from Market Perform)
with higher Target Price of RM2.78 (from RM2.21). Our upgrade is premised on
solid earnings growth which is on track to achieve record profit level, and sturdy
balance sheet to support dividend pay-out.
Above expectations. 9M16 net profit of RM100.0m (+61.2% YoY) was above expectations
by matching 96% of our in-house forecast and 91% of the consensus’. The positive deviation
can be attributed to higher-than-expected profit margins due to the turnaround in Seed and
Vincci segments. As expected, a 4th interim DPS of 2.5 sen was declared on top of a special
DPS of 1.5 sen, lifting YTD DPS to 11.5 sen which is close to our forecast of 12.0 sen for FY16.
YoY, 9M16 revenue surged 26.0% to RM952.3m driven by additional sales from 13 new
outlets (5 Padini Concept and 8 Brands Outlet) as well as strong sales growth from its
existing stores. Gross profit grew slower than revenue by 22.5% to RM402.9m as gross
margin was 1.2ppt lower due to the higher costs of merchandise arising from weaker MYR.
However, net profit managed to jump by 61.2% to RM100.0m due to the lower selling and
distribution expenses allocation (from 25.8% to 23.4% of revenue) and lower effective tax
rate (from 30.9% to 26.0%).
QoQ, 3Q16 revenue was flattish (+0.6%) at RM342.4m as both quarters were boosted by
seasonality (year-end and Chinese New Year, respectively). However, gross profit grew 4.7%
to RM142.3m as gross margin expanded by 1.7ppt which we think can be attributable to
lower merchandising costs due to the stronger MYR vis-à-vis 2Q16. As a result, net profit
inched up by 6.2% to RM35.1m.
Flying high above headwinds. We are buoyed by the strong set of results that was a
chieved on the back of weak consumer sentiment throughout the year. We believe Padini
has adopted the right strategy in focusing on the value-for-money segment in Brand Outlet
while the business restructuring in Vincci and Seed has also borne fruit. Moving forward,
we expect the earnings momentum to be sustained, underpinned by the strong brand profile
of the Group and the continuous expansion in new stores.
Earnings forecasts upgraded. Our FY16E and FY17E net profits were lifted by 19.7%
and 26.3%, respectively, after assuming higher profit margins.
Upgrade to Outperform (from Market Perform) with higher Target Price of RM2.78
(from RM2.21).Correspondingly, with the earnings upgrade, our TP is raised to RM2.78,
based on unchanged 13x PER FY17E, which is on par with +0.5SD over its 5-year mean.
Our TP offers upside of 21% from the last latest closing price; thus, rating is upgraded to
Outperform. Fundamentally, we think the positive revision is warranted by its solid earnings
growth (54.5% and 13.8% in the next 2 years) and strong balance sheet position
(net cast of RM155.3m or 23.6 sen/share) which can support its dividend pay-out.
Valuation is not too demanding considering the Group is on track to achieve its highest
ever net profit in FY16.
Source:
Kenanga Research - 19 May 2016
