Financial year 2017 a good year for Padini with lower operating expenses
KUALA LUMPUR: Padini Holdings Bhd’s (Padini) financial year 2017 (FY17) core net profit has come in above expectations, on the back of lower-than expected operating expenses.
As per a filing on Bursa Malaysia, Padini’s profit after tax for the 12-month period ended June 30, 2017 amounted to RM157.388 million, an improvement of 14.6 per cent year on year.
Padini’s FY17 core net profit at RM189.6 million excluding the inventories written off at RM32.2 million was above the research arm of Kenanga Investment Bank Bhd’s (Ken an ga Research) expectations at 118 per cent of its in-house forecast and 120 per cent of consensus due to lower-than expected operating expenses.
An interim dividend per share (DPS) of 2.5 sen and a special DPS of 1.5 sen was declared, bringing the FY17 DPS to 11.5 sen, which was below Kenanga Research’s expectation (of 14.5 sen for FY17).
“We are positive on the strong set of results that was achieved despite the weak consumer sentiment throughout the year,” Kenanga Research said.
“We believe Padini has adopted the right strategy in focusing on the value-for-money segment in Brand Outlet while the business restructuring in Vincci and Seed has also born fruit.”
Moving forward, the research arm expected the earnings momentum to be sustained, underpinned by the strong brand profile of the group and the continuous expansion in new stores.
Post results, Kenanga Research increased its FY18 earnings by 20 per cent and introduced its FY19 earnings assumptions at RM239.9 million.
The research arm imputed more positive same-store sales growth (SSSG) coupled with the expansion of new stores.
“We understand that Padini is planning to open another 12 new stores for FY18,” it said.
“We assume the same for FY18 and we assume another opening of 12 new stores for FY19.”
All in, Kenanga Research maintained ‘outperform’ call on the stock with a higher target price of RM4.60 per share, from RM3.80 per share previously.
“The share price rose 29 per cent since we upgrade our call to ‘outperform’ and we believe the dividend yield of three per cent on the back of sturdy balance sheet and strong operating cash flow should continue to provide support to the share price,” it said.