Padini Holdings Bhd - First Look (Repost)

**Constantly tweaking to decide how I can best show information in the quickest manner to readers. I added more useful figures and also explanation of these financial indicators over in glossary**

Padini Holdings Berhad is an investment holding company. The Company's subsidiaries are dealers of ladies' shoes and accessories, dealers of garments and ancillary products, dealers of children's garments, maternity wear and accessories, provision of management services and dealers of garments, ladies' shoes and ancillary products. The Company principally operates in Malaysia. The Company's subsidiaries include Vincci Ladies' Specialties Centre Sdn. Bhd., Padini Corporation Sdn. Bhd., Seed Corporation Sdn. Bhd., Yee Fong Hung (Malaysia) Sendirian Berhad, Mikihouse Children's Wear Sdn. Bhd., Padini Dot Com Sdn. Bhd., Padini International Limited, Vincci Holdings Sdn. Bhd. and The New World Garment Manufacturers Sdn. Bhd.

Stock Rating: OUTPERFORM

Price: RM1.40

Target price: RM1.50  

based on 2016 PE of 12.5

Long Term Outperform (5-year period)

Short Term Bearish (3-month period)

Risk Level: Medium-High

BursaMarketPlace Overview

Profitability : Growing EPS, DPS. Expected headwind (GST) in 2014.
Since 2012 facing intense competition by H&M and Uniqlo. Compounded by implementation of GST in 2014 and higher capital cost from opening 6 Padini Concept Store & 6 Brands Outlet (to open in 2016). DY @ 7.14% is solid.
*For profit analysis and comparison with competitors please refer to LC Chong's post.

Leverage : Coverage of debt is healthy. DE ratio of not more than 0.5.
2012: 0.15, 2013: 0.10, 2014: 0.13
*PADINI (vs Bonia, AsiaBrands, Voir, TGL, Kamdar) is the least leveraged company. *Retained Cash Flow to Debt – 386.2%. 

Returns on Equity(ROCE) : Not less than 10% using 3-yr average.
2012: 22.52%, 2013: 18.33%, 2014: 18.20%
Returns on Equity(ROE) : Not less than 10% using 3-yr average.
2012: 30.64%, 2013: 24.00%, 2014: 23.93%
*PADINI (vs Bonia, AsiaBrands, Voir, TGL, Kamdar) is the champion in generating profits with the highest efficiency.

Valuation : Lower than 5-yr average mid range PE.

Current PE: 11.40, Historical 5-Yr PE Avg: 12.19, Fwd PE Growth: 2.05. The current share price has breached below FY 2016 PE 12.50 target price of RM 1.50. This would seem to suggest that its valuation is low at this price level.

*For an in depth "Fundamental Analysis" I highly recommend LC Chong's post : PADINI – Fundamental Analysis (21 Aug 2015) Also worth mentioning is Kenanga Research's brief report : RESULT NOTES - PADINI HOLDINGS BERHAD - 19 AUGUST 2015

Conclusion
In valuation terms, it look quite attractive. Also the dividend yield of 7.2% at current price is a steal (which what attracted me in the first place) and would help offset further small dips in the price over the short term.

Recent rout in KLSE has not impacted PADINI "yet" - has the price really bottomed out? Effects of the GST (1/4/15) on the Malaysia Consumer Confidence Index (see below) has shown no signs of recovering. Adjustment period of GST is usually one year based on the experience of other countries. Budget 2016 will be tabled in October may hold unexpected surprise. Will monitor PADINI for now and buy slowly later using cost averaging method.

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.