1QFY21 net profit of RM20.7m (+6% YoY) is deemed to be within expectations at 17%/18% of ours/consensus’ full-year estimates. We believe the group is poised for further recovery (albeit gradual) moving ahead, particularly with its 2QFY being a seasonally stronger festive quarter. Maintain OP with TP of RM2.90, as we continue to like the group for its expected robust recovery (+58% growth in FY21E EPS) and solid net cash position of c.RM505m.

Within expectations. 1QFY21 net profit of RM20.7m came in-line with expectations at 17% and 19% of our and consensus’ full-year estimates, respectively. Note that 1Q historically takes up 15% of full- year earnings. No dividend was declared, which came below our expectation.

Results’ highlights. YoY, 1QFY21 revenue came in lower by 8%, no thanks to weaker sales attributable to lower retail footfall during the pandemic. Despite that, PBT margin expanded by 1.1ppt on tighter cost control and rental rebates, which prompted net profit to record a growth of 6%.

QoQ, 1QFY21 swung back to a net profit of RM20.7m (from 4QFY20 net loss of RM16.8m). The stronger results were boosted by: (i) robust sales recovery (+78%) as footfall gradually returned to the malls after the easing of movement restrictions, as well as (ii) better margins from more prudent opex allocation of 29% (versus 4Q’s 62% of sales).

On track with recovery. The resurgence of Covid-19 cases locally is likely to spell further uncertainties for the group’s recovery path, given that retail footfall may now take longer to return back to pre-Covid-19 level. That being said, we believe the group should still be poised for a recovery (albeit gradual) moving forward, especially with its upcoming 2QFY being a seasonally stronger quarter boosted by festive demand. This is further supported by the group’s strong brand equity locally, which could allow it to capture a greater share of the down-traders amid the current economic uncertainties, mainly through its focus on the value-for-money segment (via Brands Outlet and Padini).

Post-results, we made no changes to our earnings forecast but opted to take a more conservative stance towards FY21 dividend forecast, reducing it to 7.50 sen (from 11.50 sen previously).

Reiterate OUTPERFORM with unchanged TP of RM2.90 based on an ascribed FY21E PER of 16x (near +1.0SD of its 5-year mean). We believe the stock deserves to trade at a premium, premised on: (i) anticipation for a robust recovery in FY21 post-lockdown which could potentially drive a 58% growth in EPS from a low base in FY20, as well as (iii) solid net cash position of c.RM505m as of this quarter, which would allow the group to weather through these challenging times. Risks to our call include: (i) lower-than-expected sales, and (ii) higher-than-expected operating expenses.

Source: Kenanga Research - 30 Nov 2020