PADINI (7052) - Stellar earnings lift Padini's share price near three-month high
KUALA LUMPUR (Feb 21): Fashion retailer Padini Holdings Bhd's share price jumped 6.2% in the morning trading session following the release of a stellar set of quarterly earnings that beats market expectation yesterday.
The stock, which rebounded from recent low of RM2.30, continues its climb to a day's high of RM2.83 shortly after the opening bell. It retreated slightly and ended the morning session at RM2.74, up 6.2% or 16 sen from yesterday's closing of RM2.58.
In its result review note, AllianceDBS Research commented that value has emerged due to the recent share retracement. The research outfit upgraded the stock to "buy" recommendation with an unchanged target price of RM2.95, partly due to expectation of a special dividend in the pipeline.
It forecasts Padini's annual net profit to come in at RM156 million, or 23.7 sen per share, for the financial year ending June 30, 2017 (FY17) compared with RM137 million, or 21 sen per share, in the previous financial year.
AllianceDBS analyst Cheah King Yoong said the stocks has corrected by about 10% since the recent downgrade back in end-November 2016.
"We believe that value has emerged in view of its share price retracement given that the stock currently trades at an implied PEG (price-earnings growth ratio) of less than 1 and our target price provides the total return of more than 15%," he said.
Padini reported a 65% jump on its net profit to RM54 million for the second financial quarter ended Dec 31, 2016 (2QFY17), which was driven by 25% growth in revenue and higher gross profit (GP) margin of 42% versus 40% in 2QFY16 due to less product markdown during its special four-day nationwide special sales.
"Its earnings accounted for 52%/57% of our or consensus full-year earnings forecasts," he said.
Meanwhile, Cheah also shared that the GP margin could come under pressure in second half financial year 2017 due to the weakened ringgit.
The research house said the group sources about 80% to 90% of its products from China, through its sourcing agents.
"Although we understand that the correlations between currency movement and its GP margin is not so direct given that its sourcing agents could opt to absorb the currency difference. We maintain our view that margins could come under pressure in the 2HFY17 due to the persistent ringgit weakness since Nov 2016," it added.
Furthermore, Cheah said the group may also declare a special dividend of 1.5 sen per share should earnings growth momentum be sustained, giving an attractive yield of 4.5% (3.9% without special dividend).
PADINI (7052) - Stellar earnings lift Padini's share price near three-month high
http://www.theedgemarkets.com/my/article/stellar-earnings-lift-padinis-share-price-near-three-month-high
