PADINI (7052) - Padini - Another year of good performance driven by aggressive expansion



  • 4QFY17 earnings rose by +5.7%yoy to RM39.5m
  • Revenue increased by +32.0%yoy to RM460.5m
  • Despite the revenue increase, margins contracted
  • Interim dividend of 2.5sen per share declared
  • The decline in margins were due to higher operating costs
  • Maintain to NEUTRAL with a revised TP of RM3.79
Earnings met our and consensus expectations. Padini Holdings Berhad’s 4QFY17 earnings rose by +5.7%yoy to RM39.5m while the full year FY17 earnings increased by +14.6%yoy to RM157.4m. The FY17 earnings met our and consensus expectation, accounting for 99% and 100% of full year forecasts respectively.

4QFY17 revenue increased by +32.0%yoy. Revenue for 4QFY17 increased by +32.0%yoy to RM460.5m. The increase was partly contributed by the positive growth from the existing stores with 8% same stores sales growth. Another reason for the improved performance was due to opening of fourteen new stores during the current 12-month period. The fourteen new stores consist of six Padini Concept Stores, seven Brands Outlets and one free standing store. Approximately RM71.0m or 4.5% of total revenue were contributed from these fourteen new stores starting from Nov 16 to June 17.

Despite the revenue increase, margins contracted. The cost of sales increased at a faster rate than revenue resulting in gross profit (GP) margin declining by -5.7ppts yoy to 34.4%. The decline in GP margin is due to the group’s strategy to retain retail price in spite of the pressures of rising costs in addition to the inventory losses, written down and written off amounted to RM26.0m as compared to RM1.9m recorded in the previous corresponding quarter. This is the result of the initiative of the management to embark on a more stringent implementation of the inventory policy with the use of stricter write off and write down estimates. Meanwhile, PAT margin declined -2.1ppts yoy to 8.6% mainly contributed by the selling and distribution expense increased of +20.1%yoy.

Interim dividend declared. The Company has declared the 1st interim dividend of 2.5 sen per ordinary share (single tier) for FY18, which will be payable in September 2017.

Source: MIDF Research - 28 Aug 2017