Adverse impact from Covid-19 pandemic to be larger in Padini’s 4QFY20
The adverse impact from the Covid-19 pandemic has been projected to be larger in Padini Holdings Bhd’s (Padini) fourth quarter of financial year 2020 (4QFY20) results.
Padini’s first nine months of FY20 (9MFY20) core net profit of RM90.5 million accounted for 84 per cent of AmInvestment Bank Bhd’s (AmInvestment Bank) and 70 per cent of street’s full-year earnings forecasts respectively.
“We deem this as largely in line with our expectations as we anticipate a subdued performance in 4QFY20 due to the full-blown impact of Covid-19 on retail shopping,” AmInvestment Bank said.
“We anticipate the adverse impact from the Covid-19 pandemic to be larger in 4QFY20 due to the extended Movement Control Order (MCO) affecting most of the quarter from April 1 to June 9, 2020.
“However, the group plans to control costs, preserve cash, streamline operations and optimise working capital which should slightly lessen the negative impact.
“We also expect recovery to come in gradually in FY21F and FY22F post-containment of Covid-19 pandemic.”
As such, the research firm’s FY20F, FY21F and FY22F core net profit for Padini amounted to RM107.4 million, RM148.1 million and RM170.6 million, respectively.
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) earnings forecast for the group were cut by 29.3 per cent and 8.8 per cent for FY20E and FY21F as it took into consideration of a more cautious consumer sentiment amid the Covid-19 pandemic.
“Besides consumer sentiment, Covid-19 will also have an effect on sales as consumers would have switch to online fashion platforms that are operating during the MCO especially before the Raya festive season and cost as Covid-19 has affected the supply chain of its products, which may lead to an increase in costing,” MIDF Research said.
“However, the reopening of businesses in early May just before Raya, may help to recoup some loss sales previously.
“Moreover, there may be a pent up demand when consumer sentiment improves as Padini’s products are positioned at accessible price points.”
On Padini’s dividend, MIDF Research noted that contrary to the four sen dividend (2.5 sen interim and 1.5 sen special dividend) announced the past four financial years, the group did not announce any dividend for the quarter.
“We think that the company will focus on preserving cash in face of the uncertainties that impacts its business.”
That said, the research arm believed that Padini may resume the dividend payout when there is more clarity for the business outlook.
“This will be supported by its net cash of RM449.8 million and strong operating cash flow.”
MIDF Research expected another dividend for this financial year albeit at a smaller quantum. As such, the research arm’s dividend per share (DPS) assumption is now eight sen from 10 sen previously.