Padini: Earning Soared

Result Update

for QE30/6/2018, Padini's net profit rose 44% q-o-q or 45% y-o-y to RM57 million while revenue rose 12% q-o-q or 4% y-o-y to RM478 million. Revenue increased mainly due to increased number of outlets, which increased by 5 Padini Concept stores and 7 Brands Outlet stores opened during the twelve-month period under review.  Profit before tax also increased as a result of the impact from the increase in revenue and improvement in GP margin, counter balance by the increase in selling & distribution expenses.


Table: Padini's 8 quarterly results

We can see clearly that Padini's net profit was way above the net profit achieved in QE31/12/2016. The acceleration in net profit could herald a new phase of earning growth for Padini.


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

Financial Position

Padini's financial position is deemed satisfactory as at June 30, 2018 with current ratio at 2.9x and gearing ratio at 0.4x. Net cash balance was RM414 million or RM0.63 per share.

Valuation

Padini (closed at RM6.04 yesterday) is now trading at a trailing PER of 22x (based on last 4 quarters' EPS of 27.11 sen). Excluding the net cash of RM0.63, Padini's PER would improve slightly to 20x. At either one of these PERs, Padini is fairly attractive.

Technical Outlook

Padini is in a long-term upward channel. It is now pressing against the upper line, which is likely to cap its upside in near term.


Chart 1: Padini's monthly chart as at Aug 27, 2018 (Source: Shareinvestor.com)

The weekly chart shows potential weakness ahead but the share prices will be well-supported by the intermediate uptrend line, SS at RM5.00-5.20.


Chart 2: Padini's weekly chart as at Aug 27, 2018 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance and satisfactory financial position, 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.