Saturday, September 7, 2013

Padini : Dragged by higher expenses (DBSV)

Padini
HOLD RM1.66
KLCI : 1,686.17
Price Target : 12-Month RM 1.75 (Prev RM 1.80)
Dragged by higher expenses

4Q13 net profit of RM16m was below expectation as higher operating expenses - namely selling and distribution costs – ate into margins
Cut FY14-15F EPS by 9-10% after adjusting for weaker margins
Maintain HOLD with RM1.75 TP; declared 1st interim net DPS of 2.5 sen

Highlights
Below expectation. Padini’s 4QFY13 net profit inched up 1.1% y-o-y to RM15.7m, buoyed by revenue which grew 4.4% to RM177m. However, full year profit missed expectation at only 91% of our forecast.


The marginal increase in 4QFY13 bottomline was largely due to lower margins, as a result of higher expenses associated with a larger operating gross floor area. Selling and distribution costs were notably higher (+61% y-o-y) and reduced EBIT margin to 12.8% from 13.5% in the year ago period. Meanwhile, net profit fell 37% q-o-q as 3QFY13 saw stronger sales during the Chinese New Year festive season. The group has declared its first interim net DPS of 2.5 sen (1.5% net yield).

Our View
Cut FY13-14 EPS by 9-10%. We remain neutral on Padini because of several challenges in the domestic retail sector. This includes strong competition and high operating expenses which will continue to pressure Padini’s margins. Hence, we reduced FY13-14F EBIT margins to 15.8% (from 17.4%) and subsequently cut EPS by 9-10%.

Recommendation
Maintain HOLD. Following the earnings downgrade, we nudged down TP to RM1.75 TP (prev RM1.80), pegged to 12x CY14 EPS of 14.6 sen. Valuation is fair at 11x CY14 PE, while downside is supported by CY14 net yield of 5.4%.




Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 29/08/13

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