Padini’s  1QFY14  results  were  in  line  with  our  estimate  but  slightly below  consensus’.  Turnover  and  net  profit  rose  8%  and  9.6%  y-o-y respectively,  backed  by  stronger  sales  in  conjunction with  the  festive seasons  of  Hari Raya  and National  Day.  The company has proposed a 2.5  sen  interim  dividend  and  1.5  sen  special  dividend.  Maintain  BUY, with our FV at MYR1.95.

• As expected.  Padini’s 1QFY14 sales and earnings were higher by 8% and 9.6% y-o-y respectively, mainly bolstered by  an  increase in exports and  improved  numbers from its  Brands Outlet  stores.  The  Padini  label was  still  the  largest  revenue  generator,  contributing  31.2%  of  total revenue while  sales from  Brands Outlet  made up  28.6%.  Compared to 4Q13,  revenue  and  net  profit  was  significantly  higher  by  22.7%  and 76.7%  due  to  the  group’s  Hari  Raya  and  National  Day  promotions  in 1Q14.  All  brands  recorded  better  sales  except  Padini,  as  consumerswere more inclined towards value-for-money items.
• Better margins. Its gross profit margin stabilised at 47% while EBIT was at  18.2%  (vs 17.4% in 1QFY13) and PBT  stood  at 17.9% (vs 17.1% in 1QFY13),  boosted  by  stronger  sales.  AEON  has  proposed  a  2.5  sen DPS second interim dividend and 1.5 sen special dividend.  We believe the group will be more generous in  paying  out  dividends  in future  as  it has a huge cash pile of MYR178.1m as of Sept 2013.
• More new stores  to open.  As  we said  in our  29 Aug  report,  A Better Year Ahead,  the opening of  Padini’s  seven new outlets  are on track. A Padini  Concept  Store  (PCS)  and  Brands  Outlet  store  (BO)  opened  in Gurney Paragon Mall, Penang in 1Q14, enlarging the group’s gross floor area  by 50.4k sq ft. By 2Q14, three  BO stores and two PCS outlets  will open in Pulau Langkawi, Seremban and Miri.  We believe the aggressive store expansion will spur the group’s top- and bottomline growth.
• Maintain BUY. We keep  our forecasts on account of the results coming in  line  with  estimates.  We  are  optimistic  on  Padini’s  outlook  due  to  its solid fundamentals and progress of outlet expansion. Maintain BUY, with a  FV of MYR1.95,  based on 14x FY14 EPS.  Its dividend yield remains attractive at 6.1%.

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Company Profile
Padini is involved in the retailing of apparel, footwear and accessories.

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Source: RHB