Padini: Earnings Soared

Result Update

for QE31/12/2016, Padini's bet profit rose 90% q-o-q or 65% y-o-y to RM54 million while revenue rose 38% q-o-q or 25% y-o-y to RM427 million. Revenues rose sharply q-o-q due to the Christmas season and the year-end school holidays. Operating expenses did not increase proportionately to the increase in revenue, resulting in the q-o-q improvement in profit before taxation by 83% (RM33.1million).


Table: Padini's 8 quarterly results

We can see clearly that Padini's net profit was way above the net profit achieved in QE31/12/2015. The acceleration in net profit could herald a new phase of earning growth for Padini.


Graph 2: Padini's P&L  for last 18 quarterly results

Financial Position

Padini's financial position is deemed satisfactory as at Dec 31, 2016 with current ratio at 2.1x and gearing ratio at 0.7x.

Valuation

Padini (closed at RM2.58yesterday) is now trading at a trailing PER of 11x (based on last 4 quarters' EPS of 23.65 sen). At this PER, Padini is very attractive.

Technical Outlook

Padini has broken above its intermediate downtrend line, RR at RM2.40 last week. MACD has hooked up and it could well re-enter the positive territory again. This would signal the co nitnuation of its prior uptrend.


Chart 1: Padini's weekly chart as at Feb 20, 2017 (Source: Shareinvestor.com)

From the monthly chart, we can see that Padini is still in a long-term uptrend line with support at RM2.20.


Chart 2: Padini's monthly chart as at Feb 20, 2017 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance and satisfactory financial position, attractive valuation and positive technical outlook, Padini is a good stock to buy for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.