Padini Holdings Berhad is a Malaysian retail company that has experienced 11% annual revenue growth since 2012. However, net profit growth has contracted by 6% annually over the same period due to declining profit margins. The company has no debt and generates strong cash flows from operations. At the current share price of RM1.35, Padini offers an attractive dividend yield of 7.5% but faces risks from a deteriorating profit trend and potential economic downturns. The analyst estimates a fair share price range of RM1.30-RM1.60 based on a PE ratio of 15.
2. 475
521
568
723
790
866
978
50
61
76
96
85 91
80
81
111
31
77
162
52
192
0
50
100
150
200
250
0
200
400
600
800
1,000
1,200
FYE 2009 FYE 2010 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
Millions
Revenue
Millions
GrowthTrend
Revenue PAT Net cash fr op.
• 11% YOY revenue growth since 2012
• 6% net profit YOY contraction
(ALERT)
• 36% YOY growth of cash flow from
operations
• Financial year end is 30 June 2015
• Par value at RM0.10
• RM80 million net profit FYE June 2015
• * YOY stands for year over year 10% 9%
27%
9% 10% 13%
23% 24% 27%
-11%
6%
-12%
38%
-72%
149%
111%
-68%
270%
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
FYE 2010 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
Growth Rates
Revenue Growth PAT Growth Cash fr Op Growth
3. 26.7%
29.3% 27.9%
31.3%
27.4% 27.7% 28.3%
49.1% 50.2% 51.2%
48.2% 46.7% 46.2%
43.2%
10.4% 11.7% 13.3% 13.3%
10.8% 10.5%
8.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
FYE 2009 FYE 2010 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
Profitability
Eff. tax rate Gross Profit Margin Net profit margin
• Profit margin deteriorate since
2012 to single digit 8% (ALERT)
• Still a fair profit margin for
listed company
• Due to pricing & competition
pressure.
• The competitive landscape &
economic environment had on
profit margin, as explained in
Padini’s Quarterly Report
“…For the time being, at least
over the medium term, this
should be the new normal.”
5. • Operations generated good
cash flow
• In 2005, cash generated from
operations is RM192 million
• RM43 million used on capital
expenditure
• RM66 million paid as
dividend
• RM34 used to buy short
terms investments like unit
trust
• Net cash increased by RM53
million
81 111
31
77
162
52
192
(22) (28) (24) (28) (16) (42) (43)(18) (18) (33) (53) (53)
(76) (66)
2
20
(2) (10)
(61)
(34)
(40)
(65)
7
5
(83)
125
(53)
(250)
(200)
(150)
(100)
(50)
0
50
100
150
200
250
FYE 2009 FYE 2010 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
Millions
Source & Applicationof Cash
Net cash fr op. Capex Dividend Paid Investment Net Cash/ Debt Movement
6. • Net cash & short term
investment, after net off all
borrowings, is RM207 million
• EDR with 100% equity 0%
net debt. (Gearing is 0)
• No borrowing risks. Can ride
through bad time.
204
234
283
340
372 388 406
100% 100% 100% 100% 100% 100% 100%
0% 0% 0% 0% 0% 0% 0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
50
100
150
200
250
300
350
400
450
FYE 2009 FYE 2010 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
Millions
Equity Debt Ratio
S/hs’ equity Net Debt Equity % Debt %
19 20
0 2 12
74
10966
135
139 138
206
97
137
(29) (26) (25) (31)
(19)
(37) (26)
(3) (10) (22) (20)
(17)
(15)
(13)
53
119
92 89
183
119
207
(100)
(50)
0
50
100
150
200
250
300
FYE 2009 FYE 2010 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
Millions
Cash, Equivalent & Borrowings
ST Investment Deposit & Cash ST Borrowings LT Borrowings Net Cash Equivalent
7. • 2015 price range is between
RM2.01 & RM1.33 where
PERs are between 16.5x &
10.9x
• This graph gives a good
gauge on price range
3.58
4.30
1.35
1.94
2.37
2.13
2.01
2.25
2.39
1.00
0.82
1.69
1.58
1.33
1.55
1.78
0.43
0.52 0.57 0.59 0.62
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
FYE 2009 FYE 2010 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
Share Price
Highest price Lowest price Average price Closing price NA/share
8. • 12x is a fair PER in this market conditions
without evidence of EPS growth
• In a better market outlook scenario (not now),
15x should be reasonable
• Consistent dividend pay out
• At RM1.34, the dividend yield is 7.5% which is
good. DPS is growing every year except for
2015. DPS’s YOY growth is 25.7% since 2011
11.7
13.3
18.3
15.4
16.5
8.7
5.6
13.0
11.4
10.9
10.2
9.5
15.6
13.4 13.7
9.2
12.6
14.6 14.3
11.0
0.1151
0.1459
0.1298
0.1382
0.1219
0.1000
0.1200
0.1400
0.1600
0.1800
0.2000
0.2200
0.2400
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
EPS
PE Ratio
High PE Low PE Avg PE PER EPS
3.0% 3.1%
3.4%
5.4%
5.0%4.0%
7.3%
4.7%
7.3%
7.5%
3.4%
4.3%
3.9%
6.2%
6.0%
3.77%
3.26%
4.23%
5.84%
7.46%
0.0400
0.0600
0.0800
0.1150
0.1000
0.0000
0.0500
0.1000
0.1500
0.2000
0.2500
0.3000
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015
DPS
Dividend Yield
Low DY High DY Avg DY Div Yield DPS
9. • Fair price range between 1.30 – 1.60.
Lower is bargain.
• Dividend yield 6.3% & above
• Good chance of capital gain in
medium term (1 – 2 years)
• Key risks are the deteriorating profit
& profit margin trend & broad
economy downturn & GST had on
festive seasons
EPS DPS
Est
Growth
Fair price
@ PE 15
0.1219 0.1000 2.0% 1.83
Date: 15/9/2015
Price Price
(MYR) PE Ratio
Dividend
Yield
Dividend
return *
Capital
gain **
2.10 17.2 4.8% 6.8% -12.9%
2.00 16.4 5.0% 7.0% -8.6%
High 1.90 15.6 5.3% 7.3% -3.8%
1.80 14.8 5.6% 7.6% 1.6%
1.70 13.9 5.9% 7.9% 7.6%
1.60 13.1 6.3% 8.3% 14.3%
Fair 1.50 12.3 6.7% 8.7% 21.9%
1.40 11.5 7.1% 9.1% 30.6%
1.30 10.7 7.7% 9.7% 40.7%
Bargain 1.20 9.8 8.3% 10.3% 52.4%
1.10 9.0 9.1% 11.1% 66.2%
1.00 8.2 10.0% 12.0% 82.9%
Notes:
• Report dated 15 Sep 2015 (Share Price RM1.35)
• Financial year end is 30 June 2015
• Par value at RM0.10
• Valuation is subjective, it changes constantly when
new information available, i.e. announcements,
quarterly report
http://stockinvesting.financialplanningmalaysia.com/
* Dividend Growth model with dividend growth at 2%
** Based on fair price in normal market conditions when PE is 15