PP16832/01/2013 (031128) PP16832/01/2012 (029059) Malaysia Results Review 30 August 2012 17 October 2011 Buy (unchanged) Padini Holdings Another Strong Year; Raising TP Share price: MYR2.33 Target price: MYR2.61 (from MYR2.44) Weak quarter but strong year. The weaker 4QFY6/12 results were expected – net profit dropped 17% YoY to MYR15.1m. More importantly, however, FY6/12 net profit rose 26% YoY to MYR94.9m, Kang Chun Ee making up 99% of our and consensus estimates, and marking the third [email protected] consecutive year of earnings growth exceeding 20%. Padini continues (03) 2297 8675 to impress. We maintain our BUY recommendation with a higher TP of MYR2.61, pegged to 15x FY6/13 PER (14x previously). 4Q has been the weakest quarter. On a QoQ basis, 4QFY6/12 posted lower revenue (-4% QoQ) and net profit (-38% QoQ). Aside from the lack of festivals during the quarter, earnings were also impacted by year-end inventory adjustments due to pilferage, obsolescence and Stock Information write-downs which resulted in the 6-ppt erosion in gross profit margin Description: Retail garments, shoes, ancillary products and QoQ. Selling and marketing expenses spiked 37% YoY to MYR48m as accessories. the group expanded its retail space. Ticker: PAD MK Remarkable 26% net profit growth in FY6/12. Cumulatively, FY6/12 Shares Issued (m): 657.9 Market Cap (MYR m): 1,532.9 revenue grew 30% YoY to MYR725m, largely due to the addition of c. 3-mth Avg Daily Turnover (USD m): 0.81 130,000 sq ft of retail space with the opening of 10 new stores. KLCI: 1,645.58 Free float (%): 50.1 However, gross profit increased at a slower pace (+19% YoY) as a result of a normalised GP margin (-4.4ppts YoY) in FY6/12. With retail Major Shareholders: % space totaling 700,000 sq ft as at end-FY6/12, we expect the group to PANG CHAUN YONG 44.0 SKIM AMANAH SAHAM BU 5.0 grow its sales by 17% and 10% in FY6/13 and FY6/14 respectively. One new store so far for FY6/13. To date, Brands Outlet in Fahrenheit 88 is the only new store opened in FY6/13. The group has not identified Key Indicators any further new store openings as yet but we keep our assumption of Net cash / (debt) (MYR m): 86.8 two new store openings in each of FY6/13 and FY6/14. NTA/shr (MYR): 0.51 Net gearing (x): Net Cash Maintain BUY with MYR2.61 TP. Though its share price has rallied 114% YTD and its dividend yield has tapered off, we continue to like the stock. Padini’s stable growth prospects provide justification for its Historical Chart valuations, over and above strong management execution capabilities and a healthy balance sheet. As at end-FY6/12, the group’s net cash 2.5 PAD MK Equity balance was MYR87m (MYR0.13/share). 2.0 Padini Holdings Berhad– Summary Earnings Table 1.5 FYE June (MYR m) 2010A 2011A 2012A 2013F 2014F Revenue 518.8 558.6 725.2 845.1 926.7 1.0 EBITDA 107.0 125.8 150.7 180.2 195.6 0.5 Recurring Net Profit 61.0 75.3 94.9 114.4 125.0 Recurring Basic EPS (cents) 9.3 11.4 14.4 17.4 19.0 0.0 EPS growth (%) 23.1% 23.5% 25.8% 20.7% 9.3% Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 DPS (cents) 4.5 4.0 6.0 6.0 8.0 PER 25.1 20.4 16.2 13.4 12.3 13.4 11.5 9.6 7.6 6.7 Performance: EV/EBITDA (x) Div Yield (%) 1.9 1.7 2.6 2.6 3.4 52-week High/Low MYR2.37/MYR0.82 P/BV(x) 6.5 5.4 4.5 3.7 3.2 1-mth 3-mth 6-mth 1-yr YTD Net Gearing (%) NA NA NA NA NA ROE (%) 27.8% 29.1% 30.5% 30.4% 27.9% Absolute (%) 17.1 41.2 124.0 154.6 113.8 ROA (%) 18.8% 18.8% 20.5% 20.5% 18.2% Relative (%) 16.3 36.3 113.0 140.9 106.3 Consensus Net Profit (MYR m) NA NA NA 110.4 123.0 Source: Maybank KE SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Page 1 of 2 Padini Holdings 17 October 2011 Padini: Results Summary Table Quarterly Cumulative FY Jun (RM m) 4QFY12 4QFY11 % YoY 3QFY12 % QoQ 12MFY12 12MFY11 % YoY Sales 168.6 132.1 27.6 176.0 (4.2) 725.2 558.6 29.8 Cost of Goods Sold (91.5) (65.0) 40.8 (84.9) 7.8 (369.9) (260.3) 42.1 Gross Profit 77.1 67.1 14.9 91.1 (15.4) 355.3 298.2 19.1 Other income / (loss) 1.4 0.7 93.3 0.4 266.0 4.2 3.7 10.9 Administrative Expenses (7.8) (7.6) 3.0 (13.2) (41.2) (40.9) (40.4) 1.3 Selling and Marketing Expenses (47.9) (35.0) 36.8 (46.3) 3.5 (188.2) (158.1) 19.1 EBIT 22.8 25.2 (9.9) 31.9 (28.7) 130.3 103.5 25.8 Interest Income 0.6 0.6 8.1 0.7 (11.6) 2.4 2.6 (6.8) Interest Expense (0.5) (0.4) 28.0 (0.6) (15.6) (2.3) (1.5) 55.6 Pretax Profit 22.8 25.4 (10.1) 31.9 (28.6) 130.3 104.6 24.6 Tax (7.7) (7.3) 6.0 (7.6) 1.1 (35.5) (29.3) 20.9 Net Profit 15.1 18.1 (16.6) 24.3 (37.9) 94.9 75.3 26.0 +/- p.pts +/- p.pts +/- p.pts YoY QoQ YoY Gross profit margin (%) 45.7 50.8 (5.1) 51.7 (6.0) 49.0 53.4 (4.4) EBIT margin (%) 13.5 19.1 (5.6) 18.1 (4.6) 18.0 18.5 (0.6) Tax rate (%) 33.9 28.7 5.2 23.9 10.0 27.2 28.0 (0.8) Source: Company, Maybank IB INCOME STATEMENT (MYR m) BALANCE SHEET (MYR m) FY Jun 2011A 2012A 2013F 2014F FY Jun 2011A 2012A 2013F 2014F Revenue 558.6 725.2 845.1 926.7 Fixed Assets 83.6 91.3 92.4 99.1 EBITDA 125.8 150.7 180.2 195.6 Other LT Assets 11.0 10.8 11.0 11.0 Depreciation & Amortisation (22.3) (20.4) (24.5) (25.9) Cash/ST Investments 138.6 137.6 213.6 275.2 Operating Profit (EBIT) 103.5 130.3 155.8 169.8 Other Current Assets 211.1 241.5 319.5 349.2 Interest (Exp)/Inc 1.1 0.1 0.9 1.4 Total Assets 444.3 481.2 636.5 734.4 Associates 0.0 0.0 0.0 0.0 One-offs 0.0 0.0 0.0 0.0 ST Debt 24.9 32.1 24.9 24.9 Pre-Tax Profit 104.6 130.3 156.7 171.2 Other Current Liabilities 113.0 89.2 175.2 201.5 Tax (29.4) (35.5) (42.3) (46.2) LT Debt 22.2 18.7 22.2 22.2 Minority Interest 0.0 0.0 0.0 0.0 Other LT Liabilities 1.6 2.2 1.6 1.6 Net Profit 75.3 94.9 114.4 125.0 Minority Interest 0.0 0.0 0.0 0.0 Recurring Net Profit 75.3 94.9 114.4 125.0 Shareholders' Equity 282.7 339.0 412.7 484.2 Total Liabilities-Capital 444.3 481.2 636.5 734.4 Revenue Growth % 7.7% 29.8% 16.5% 9.7% EBITDA Growth (%) 17.6% 19.8% 19.6% 8.6% Share Capital (m) 65.8 65.8 65.8 65.8 EBIT Growth (%) 21.5% 25.9% 19.5% 9.0% Gross Debt/(Cash) 47.1 50.8 47.1 47.1 Net Profit Growth (%) 23.5% 26.0% 20.6% 9.3% Net Debt/(Cash) (91.5) (86.8) (166.5) (228.1) Recurring Net Profit Growth (%) 23.5% 26.0% 20.6% 9.3% Working Capital 211.8 257.8 333.0 397.9 Tax Rate % 28.1% 27.2% 27.0% 27.0% CASH FLOW (MYR m) RATES & RATIOS FY Jun 2011A 2012A 2013F 2014F FY Jun 2011A 2012A 2013F 2014F Profit before taxation 104.6 130.3 156.7 171.2 EBITDA Margin % 22.5% 20.8% 21.3% 21.1% Depreciation 22.3 20.4 24.5 25.9 Op. Profit Margin % 18.5% 18.0% 18.4% 18.3% Net interest receipts/(payments) (1.1) (0.1) (0.9) (1.4) Net Profit Margin % 13.5% 13.1% 13.5% 13.5% Working capital change (66.1) (52.1) (38.4) (18.7) ROE % 29.1% 30.5% 30.4% 27.9% Cash tax paid (29.2) (29.2) (42.3) (46.2) ROA % 18.8% 20.5% 20.5% 18.2% Others (incl'd exceptional items) (1.4) 5.3 (37.1) (37.3) Net Margin Ex. El % 13.5% 13.1% 13.5% 13.5% Cash flow from operations 29.1 74.7 62.4 93.5 Dividend Cover (x) 2.9 2.4 2.9 2.4 Capex (24.0) (27.9) (29.6) (32.5) Interest Cover (x) NA NA NA NA Disposal/(purchase) 0.0 0.0 0.0 0.0 Asset Turnover (x) 1.3 1.5 1.3 1.3 Others 22.0 0.4 2.7 3.2 Asset/Debt (x) 9.4 9.5 13.5 15.6 Cash flow from investing (2.0) (27.5) (26.9) (29.3) Debtors Turn (days) 12.1 12.1 12.1 12.1 Debt raised/(repaid) 10.3 4.2 0.0 0.0 Creditors Turn (days) 99.8 99.8 99.8 99.8 Equity raised/(repaid) 0.0 0.0 0.0 0.0 Inventory Turn (days) 224.7 224.7 224.7 224.7 Dividends (paid) 0.0 0.0 0.0 0.0 Net Gearing % NA NA NA NA Interest payments 0.0 0.0 0.0 0.0 Debt/ EBITDA (x) 0.4 0.3 0.3 0.2 Others (33.0) (53.1) (1.8) (1.8) Debt/ Market Cap (x) 0.0 0.0 0.0 0.0 Cash flow from financing (22.7) (49.0) (1.8) (1.8) Change in cash 4.4 (1.7) 33.8 62.4 Source: Company, Maybank KE 30 August 2012 Page 2 of 6 Page 1 of 2 Padini Holdings 17 October 2011 RESEARCH OFFICES REGIONAL ECONOMICS P K BASU Suhaimi ILIAS Regional Head, Research & Economics Chief Economist (65) 6432 1821 [email protected] .