Review

• Padini Holdings Berhad’s (Padini) FY24 core net profit came in below expectations, reaching 86% and 93% of ours and consensus’ full-year forecasts, respectively. The negative variance mainly attributed to higherthan-expected operating costs.

• 4QFY24 quarterly revenue dipped 4.4% YoY to RM455.2mn, while core net profit declined 60.7% YoY to RM23.1mn. The sluggish performance was mainly due to lower outlet sales and same-store sales growth (SSSG), which is 10.7% lower compared to 4QFY23.

• Cumulatively, FY24 core profit slipped by 32.6% YoY to RM154.5mn, despite a revenue growth of 5.3% YoY to RM1.9bn. The disappointing result was primarily due to higher input costs and staff expenses.

• The group has declared a 1st interim dividend of 2.5sen/share for FY25, with the ex-dividend date set for 12 Sep 2024.

• Separately, the board proposed a bonus issue of up to 329.0mn shares on the basis of 1 bonus share for every 2 existing shares held. The Proposed Bonus Issue is expected to be completed by 4Q 2024.

Impact

• No change to our earnings projections, pending further guidance from the analyst briefing on Thursday.

Outlook

• Management remains optimistic about the group’s performance in FY25, supported by cost control measures, preserve cash and enhanced operational efficiency.

• For FY25, we anticipate the group to maintain its net cash position and offer a dividend yield of 3.5% throughout the year.

• The proposed bonus issue would have no material impact to the group’s earnings. We view this proposal positively, as the increase in the enlarged share base would likely further enhance share liquidity. Based on our target price of RM4.70/share, the ex-bonus price will be adjusted to RM3.10/share.

Valuation

• We reiterate our Buy call on Padini with an unchanged TP of RM4.70/share based on 15x CY25 EPS.

Source: TA Research - 28 Aug 2024