Padini- Finally it came back to the limelight again?

Padini Holding Bhd has just released its quarter result ended 31st December 2013 which is highly anticipated by many as i believe investors can't wait to monitor its performance.

Analysis for the quarter alone compare to last year corresponding quarter, revenue has up 12.7% and net profit has up 48.4%. According to the report, the increase of revenue are due to the strong sales of brand outlets. At the same times, the same store sales growth (SSSG) for the quarter reached more than 30%. It is tremendously strong growth, given the competition arise from foreign brand especially in Klang Valley area. A slight increase of gross margin coupled with the increase of revenue drive the net profit growth. Having considered that current quarter is seasonally strong quarter due to festive season, the performance is still out of my expectation.




Valuation

Padini closed at 1.78 today (27 Feb 2014), with its net cash of 24 cents and last 4 quarters (L4Q) earning per share (EPS) of 14.69 cents, it is trading at cheap valuation.

To get the actual price we are paying by buying Padini shares, we take 1.78 to minus the net cash per share of 24 cents and we get 1.54 dollar per share. Divide it with L4Q EPS, we got a PE of around 10.5. For a company with strong brand name and solid growth, it definitely worth more for me.

Let's have a look on its PE range throughout this few years.

As shown, PE of around 14.5 is the highest (without taking the net cash in consideration), personally i think market will give Padini a higher valuation than what it is trading now.



Future Prospect

From the report, 3 Brand Outlet stores and an additional Padini Concept Store have added in current FY 2014. The coming months until the end of this financial year, the management is planning to add another 3 Brand outlet stores and 2 Padini Concept Store. After the rationalization of subsidies by our government, the living cost has increased and consumers are more willing to delay their purchase on discretionary items. The focus on growing Brand Outlets with the purpose to bring in value in design and price to consumers help to grow the business. I would think that the management are trying to keep themselves remain competitive to fight with the foreign brands, while at the same time creating value to shareholders with their consistent dividend payout. Under the section "Commentary on Prospect", the management said that "These new openings together with changes made in the past year to merchandise development and pricing strategies would go a long way to improving the Group’s competitive abilities." 




Conclusion

So far i think Padini is doing well to compete with the foreign brands, it seems that they can do well in the future too. One good part for retail business is, when you have been growing your business so well in a place, you stand a foothold where when the competitors came in, it might takes a long time for them to catch you up. Another things is, Padini has been partner with AEON to grow their business, you would not be surprise to see Padini Concept Store when you went to AEON. However, i have seen no sight of  Uniqlo, Debanhams or H&M appearance in AEON, probably because of their different strategies or retail model? With that, i think it is not easy to catch up with Padini's pace in Malaysia retail market. While the business is growing well with good prospect, and the valuation is cheap for me, i would think that Padini is quite attractive now.