Padini’s 1H17 results exceed expectations on seasonal sales
The positive deviation can be attributed to higher-thanexpected sales throughout the segment as a result of aggressive promotional and sales events during the festive season. Kenanga Research
KUCHING: Padini Holdings Bhd’s (Padini) first half of 2017 (1H17) results have exceeded expectations, while also coming in within other analysts’ estimates.
As per Padini’s filing on Bursa Malaysia, the group’s profit for the six months ended December 31, 2016 amounted to RM83.09 million, compared to RM64.9 million the previous year.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), Padini’s 1H17 net profit at RM83.1 million was above expectations at 59.8 per cent of its in-house forecast and 55.8 per cent of the consensus.
“The positive deviation can be attributed to higher-than-expected sales throughout the segment as a result of aggressive promotional and sales events during the festive season,” Kenanga Research said.
As expected by the research arm, third interim dividend per share (DPS) of 2.5 sen was declared, bringing total DPS declared in 1H17 to 7.5sen, compared to nine sen in 1H16.
Meanwhile, AllianceDBS Research Sdn Bhd (AllianceDBS Research) reported that Padini’s 1H of financial year 2017 (1HFY17) results were within the research house’s but above street expectations.
Padini’s 1HFY 17 earnings of RM 83 million accounted for 52/57 per cent of AllianceDBS Research’s and consensus’ full- year projections.
According to AllianceDBS Research, gross profit (GP) margin for the quarter strengthened by 200 basis points (bps) year on year (y-o- y) to 42 per cent, mainly supported by less product mark down during the quarter despite the group engaging in four-day special sales nationwide.
The group sources about 80 to 90 per cent of its products from China and the remaining from regional, through its sourcing agents.
“Although we understand that the correlations between currency movement and its GP margin is not so direct given that its sourcing agents could opt to absorb the currency difference, we maintain our view that margins could come under pressure in the 2HFY17 due to the persistent ringgit weakness,” the research house said. “Since November 8, ringgit has depreciated about 4.5 per cent against RMB.”
Kenanga Research highlighted that second quarter of 2017 (2Q17) sales were stronger on a quarter on quarter (q-o-q) basis than it initially predicted thanks to the aggressive promotional and sales events carried out which the research arm believed were for the purpose of inventory clearance for year-end peak season as well as to spur sales in the absence of festivities during the previous quarter.
There search arm was still cautious on the prospects ahead in view of the persistently weak consumer sentiment and competitive business environment.
“On a brighter note, strong sales momentum could be sustained in view of the festivities and school holiday ahead,” it said.
Kenanga Research has increased FY17E and FY18E net profits by 6.3 per cent and 6.4 per cent, respectively.
The research arm imputed more positive same-store sales growth, expansion of new stores and are expecting a sales recovery in coming quarters.
On the other hand, AllianceDBS Research has maintained its DPS forecasts of 10sen, but now foresee that the group may declare a special dividend of 1.5sen per share should earnings growth momentum is sustained, giving an attractive yield of 4.5 per cent ( 3.9 per cent without special dividend).