MALAYSIA

INVESTMENT RESEARCH REPORT

KDN PP13226/04/2014 (032022)
JF APEX SECURITIES BERHAD
(47680-X)


Please read carefully the important disclosures at end of this publication







Result
Padinis 3QFY14 net earnings was reported at
RM21.1mil, shed 25.7% q-o-q and 14% y-o-y.
Meanwhile, revenue of RM218.9mil was 6.5% lower q-o-q
but climbed 7.3% y-o-y.
For 9MFY14, net profit stood at RM77.3mil, climbed
12% from RM69mil a year ago. Similarly, revenue was
also 9.4% higher as compared to a year ago.
Within expectations. The Groups 9MFY14 net profit was
within our and streets expectations.
Comment
Robust earnings growth on yearly basis. The Groups
9MFY14 net profit grew 12% to RM77.3mil from RM69mil a
year ago, supported by the earnings contribution from new
outlets and robust performance of Brands Outlet. The
strategy of the Group taping into market of value-for-money
items amid tepid consumer sentiment via competitive pricing
strategy has yielded good results.
3Q earnings lower q-o-q on seasonal factor. On a
quarterly basis, 3QFY14 earnings was 25.7% lower than the
previous quarter mainly attributed to the absence of festive
season to boost sales in 3Q whilst previous quarters
earnings was supported by Christmas and shopping spree
for Chinese New Year. Looking ahead, we expect the coming
4QFY14 earnings to remain flat on quarterly basis as 4Q
tends to be the seasonal quieter period.
High operating expenses in 3QFY14. Despite the Group
chalked up higher sales of RM218.9mil in 3QFY14 as
compared to RM204mil a year ago, net profit of the Group in
3QFY14 was weaker by 14% on yearly basis, no thanks to
higher operating expenses. As a result, operating profit
margin in 3QFY14 narrowed by 3.5ppts against 3QFY13.
A good yield play. The Group has declared a net dividend
of 2.5sen per share which will go ex on 11
th
June 2014. The
Group is on track to distribute net dividend of 11.5sen in
FY14 (inclusive of special dividend of 1.5sen). We are
expecting the Group to dish out 10sen dividend in FY15
which translate into attractive dividend yield of c.5% based
on last closing price.
Earnings Outlook/Revision
We maintain our earnings forecast for FY14-15F.
We remain positive on the earnings outlook of the
Group despite the headwinds of tepid consumer sentiment.
We expect FY15 earnings of the Group to grow by 15%,
underpinned by the new stores opening and its competitive
Company Result 29 May 2014
Padini Holdings BUY
Earnings growth unabated by tepid consumer sentiment Maintained


Share Price RM2.03
Target Price RM2.30

Company Description
Padini Holdings Berhad, through its
subsidiaries, manufactures and retails
garments, shoes, ancillary products, and
accessories.


Stock Data
Bursa / Bloomberg code 7052 / PAD MK
Board / Sector Main / Consumer
Syariah Compliant status Yes
Issued shares (m) 657.91
Par Value (RM) 0.10
Market cap. (RMm) 1335.56
52-week price Range RM1.58 2.21
Beta (against KLCI) 0.6
3-m Average Daily
Volume 2.87m
3-m Average Daily
Value^ RM5.64m

Share Performance
1m 3m 12m
Absolute (%) 0.5 6.28 -5.66
Relative (%-pts) -0.17 12.12 -10.10

Major Shareholders %
Yong Pang Chaun 43.74
Skim Amanah Saham Bumiputera 5.01


Historical Chart


Source: Bloomberg

Jessica Low Jze Tieng
03-87361118, ext. 756
jessicalow@jfapex.com.my

Jessica Low Jze Tieng
03-87361118, ext. 756
jessicalow@jfapex.com.my


29 May 2014 Company Result Padini Holdings JF APEX SECURITIES



2
pricing strategies amid the shifting of consumers preference
to value-for-money items.
Valuation & Recommendation
Maintain BUY with a higher target price of RM2.30
(previous TP: RM1.87), as we roll over our valuation to
FY15. We peg our valuation at 13x FY15F EPS, which is
close to its +1 standard deviation of mean PER as we are
positive on the Groups outlook in view of its aggressive
outlet expansion plans of 8 stores ahead.
Padini Holdings is our top pick in consumer sector for
its undemanding valuation amongst consumer stocks.
The Group is currently trading at PE ratio of 13x FY14 EPS
as compared to the average PE ratio of 17x for consumer
stocks. We also favour the Group for its attractive dividend
yield of c.5%.



Figure 1: Quarterly Figures

Year to 30 June
3QFY14 2QFY14 3QFY13 QoQ YoY 9MFY14 9MFY13 YoY

(RMm) (RMm) (RMm) % chg % chg (RMm) (RMm) % chg
Revenue
218.9 234.2 204.0 -6.5% 7.3% 670.2 612.7 9.4%
Gross Profit
101.1 109.7 100.2 -7.8% 0.9% 313.1 288.6 8.5%
Operating Profit 28.6 39.9 33.7 -28.3% -15.2% 107.9 96.4 12.0%
Pre-tax Profit 28.1 39.2 33.2 -28.5% -15.6% 106.3 94.8 12.1%
Net Profit 21.1 28.4 24.5 -25.7% -14.0% 77.3 69.0 12.0%
Gross Profit Margin (%) 46.2% 46.8% 49.1% -0.64% -2.93% 46.7% 47.1% -0.38%
Operating Margin (%) 13.1% 17.0% 16.5% -3.97ppt -3.46ppt 16.1% 15.7% 0.37ppt
Profit Before Tax Margin (%) 12.8% 16.8% 16.3% -3.9ppt -3.5ppt 15.9% 15.5% 0.4ppt



Figure 2: Financial Summary

Year to 30 June (RMm) 2011 2012 2013 2014F 2015F
Revenue 568.5 723.4 789.8 885.5 925.2
EBITDA 126.7 153.3 169.4 199.2 216.3
Operating profit 106.6 133.0 119.6 141.2 163.6
Net profit 75.7 96.9 85.4 100.8 116.4
EPS (sen) 11.5 14.7 13.0 15.3 17.7
P/E (x) 17.6 13.8 15.6 13.2 11.5
P/BV (x) 4.72 3.93 3.59 3.12 2.84
Dividend yield (%) 2.0% 3.0% 4.9% 4.9% 4.9%
PBT margin (%) 18.5% 18.1% 15.9% 15.7% 17.4%
Net Gearing (%) Net Cash Net Cash Net Cash Net Cash Net Cash
ROE (%) 26.8% 28.5% 23.0% 23.5% 24.7%

Source: Company, JF Apex






29 May 2014 Company Result Padini Holdings JF APEX SECURITIES



3
JF APEX SECURITIES BERHAD CONTACT LIST

JF APEX SECURITIES BHD

Head Office:
6
th
Floor, Menara Apex
Off Jalan Semenyih
Bukit Mewah
43000 Kajang
Selangor Darul Ehsan
Malaysia

General Line: (603) 8736 1118
Facsimile: (603) 8737 4532

PJ Office:
15
th
Floor, Menara Choy Fook On
No. 1B, Jalan Yong Shook Lin
46050 Petaling Jaya
Selangor Darul Ehsan
Malaysia

General Line: (603) 7620 1118
Facsimile: (603) 7620 6388


DEALING TEAM

Head Office:
Kong Ming Ming (ext 3237)
Shirley Chang (ext 3211)
Norisam Bojo (ext 3233)
Wong Wing Haur, Alvin (ext 3226)


Institutional Dealing Team:
Lim Teck Seng
Sanusi Bin Mansor (ext 740)
Fathul Rahman Buyong (ext 741)
Ahmad Mansor (ext 744)
Lum Meng Chan (ext 743)
Zairul Azman (ext 746)

PJ Office:
Mervyn Wong (ext 363)
Mohd Hanif Wan Said (ext 111)
Fong Jia Wen (ext 822)
Nursyazaleen Hazwani (ext 362)


RESEARCH TEAM

Head Office:
Lee Chung Cheng (ext 758)
Lee Cherng Wee (ext 759)
Jessica Low Jze Tieng (ext 756)
Soong Wei Siang (ext 754)
Elliya Harisna binti Junaedi (ext 752)


JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK
STOCK RECOMMENDATIONS
BUY : The stocks total returns* are expected to exceed 10% within the next 12 months.
HOLD : The stocks total returns* are expected to be within +10% to 10% within the next 12 months.
SELL : The stocks total returns* are expected to be below -10% within the next 12 months.
TRADING BUY : The stocks total returns* are expected to exceed 10% within the next 3 months.
TRADING SELL : The stocks total returns* are expected to be below -10% within the next 3 months.
SECTOR RECOMMENDATIONS
OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months.
MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to 10% within the next 12 months.
UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months.
*capital gain + dividend yield

JF APEX SECURITIES BERHAD DISCLAIMER

Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written
consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is
not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF
Apex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend this
report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth
herein, changes or subsequently becomes inaccurate.

JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such
statement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time to
time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written
approval of JF Apex Securities Berhad.

Published & Printed By:
JF Apex Securities Berhad (47680-X)
(A Participating Organisation of Bursa Malaysia Securities Berhad)