Overview. On yoy basis, revenue has increased to RM209.8m (+20%) whilst earnings turned to positive of RM10.5m (>100%) a sharp recovery from loss of RM16.8m. The longer business operation days and low base effect helps profit margin expanding 14.7ppt to 5%. Nonetheless, qoq profit dropped 14% owing to the implementation of Full Movement Control Order (FMCO).

Key highlights. EBITDA saw healthy growth of more than 100% yoy, in line with revenue growth. Balance sheet wise, we saw the management continue preserving its cash of RM548.5m. Its debtor days was generally as low at 16 days and has been consistently below 20 days, while trade payable at 34 days, within the credit period granted. YTD, cash conversion cycle rose to 60 days from 48 days, which is regarded as less efficient, however we think this could be one-off, as prospects of improvements are clearer –from easing SOP as well as reopening economic activities.

Against estimates: Inline. The FY21 net profit of RM54.1m was inline with ours estimate, making up 101% full year forecast, yet below the consensus estimate at 68%.

Outlook. The favourable outlook outlines our Overweight view on the stock given the successfully vaccination progress and reopening of the economy. As consumer spending will gradually recover as we move ahead, we expect Padini products is among key benefited to various financial aids (i-Citra, BPR) & loan moratorium by the government to the B40 & M40 groups.

Our call. We upgrade our call to Trading Buy with new TP of RM3.58, implying PER of 32x (+2SD 3 years historical forward PE) pegged to FY22 EPS to reflect the clarity of long-term earnings upon more sector economic activities allow to be reopened in states with 50% of adult population have been fully vaccinated.

Source: BIMB Securities Research - 30 Aug 2021