Padini Holdings Bhd PADINI FYE23Q1
Strong rebound despite supply chain issues and inflation
Last Updated: 7 Dec 2022; Analysis is based on FYE22 results and FYE23Q1 interim results.
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- At the time of writing this page, I owned shares of PADINI.
- I do my best to write this analysis as objective as possible. No point I lie to myself, and, no offence, I don’t need you to push up the stock prices.
- Fair value estimates and earnings projection are not included here, so you won’t perceive buy/sell recommendation.
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Click to view filing of the FYE2022 Annual Report in Bursa Announcement and filing of the FYE2023 Q1 Report in Bursa Announcement.
Strong revenue and profitability growth with stable margins due to recovery of consumer spending
PADINI has shown strong revenue growth +365.8% YoY, FYE2021-Q1: MYR 81.4M ➡️ FYE2022-Q1: MYR 379.1M. PADINI recorded MYR 1,319.1M in FYE2022, which is +28.1% from FYE2021: MYR 1,029.4. Refer to the following table, ever since pandemic is over, PADINI has been demonstrating strong momentum to achieve MYR 1,600 to MYR 1,700 M revenue this year. To support this assumption, PADINI recorded MYR 338.0M in FYE2019-Q1 (FYE2022-Q1: MYR 379.1M). Plus, Christmas and Chinese New Year are around the corner.
| Fiscal Year | Revenue in Million |
|---|---|
| 2016-06-30 | 1,301.2 M |
| 2017-06-30 | 1,570.7 M |
| 2018-06-30 | 1,678.8 M |
| 2019-06-30 | 1,783.0 M |
| 2020-06-30 | 1,354.7 M |
| 2021-06-30 | 1,029.4 M |
| 2022-06-30 | 1,319.1 M |
In 2023, household spending in Malaysia is expected strengthen slightly to 5.0% as Covid-related pressures further ease. The slowing of inflation will also provide boost to household spending in 2023. (Fitch Solutions) On the other hand, since a pickup in the unemployment rate impacts consumer spending contemporaneously and the impact is felt within two quarters, the full impact of consumer spending from a rise in the unemployment rate would be felt in 1H2023 and would be negligible in 2H2023. (The Edge Markets) In my opinion, the spillover effects of COVID-19 are short term.
With effective cost control and working capital optimisation, PADINI managed to maintain gross margin above 38% and achieve 16% EBITA margin in FYE2022.
In terms of profitability, ROIC of PADINI recovered from FYE2020: 7%, FYE2021: 5.7% ➡️ FYE2022: 12.5%.
Healthy leverage and coverage
By any standard, PADINI has adequate financial flexibility and ability to sustain its competitive position.
Healthy Free Cash Flow
Extreme high free cash flow in FYE2022 (MYR 681.4M) was due to higher operating profits, higher accounts payable and decrease in inventories. Will this spike become a norm? I doubt so. Despite going through 2 years of pandemic, financial muscle of PADINI is still very solid due to prudent management.
Moving forward
Supply chain and logistics issues continued to adversely affect market players post Covid-19 pandemic as the Russia-Ukraine war jolts a recovering world economy marred by movement restrictions due to the pandemic which began in early 2020. Continuing geopolitical tension among global powers have significant adverse effects on global economic growth, trade flows, supply chain disruptions, inflation, interest rates and currency volatility.
PADINI has gone through many economic turbulence, and PADINI management is proven prudent and vigilant. PADINI will recover strongly after each economic turbulence.
Management will continue to provide value for money products and implementing measures to control costs, optimise working capital, preserve cash and streamline the operations to minimise any adverse impacts.
Filing of the FYE2023 Q1 Report in Bursa Announcement
Attractive valuations
PADINI Financial Performance
| PROFITABILITY and EFFICIENCY | 2016-06-30 | 2017-06-30 | 2018-06-30 | 2019-06-30 | 2020-06-30 | 2021-06-30 | 2022-06-30 |
|---|---|---|---|---|---|---|---|
| Revenue | 1,301,193 | 1,570,722 | 1,678,790 | 1,783,022 | 1,354,679 | 1,029,387 | 1,319,097 |
| Growth YoY | 20.7% | 6.9% | 6.2% | -24.0% | -24.0% | 28.1% | |
| EBITA | 195,958 | 208,410 | 234,862 | 211,572 | 120,915 | 90,654 | 211,578 |
| Growth YoY | 6.4% | 12.7% | -9.9% | -42.8% | -25.0% | 133.4% | |
| EBITA Margin % | 15.1% | 13.3% | 14.0% | 11.9% | 8.9% | 8.8% | 16.0% |
| Net Operating Profit After Tax | 138,964 | 157,281 | 177,321 | 159,546 | 90,570 | 67,827 | 159,792 |
| Growth YoY | 13.2% | 12.7% | -10.0% | -43.2% | -25.1% | 135.6% | |
| Invested Capital | 538,776 | 634,400 | 690,222 | 764,247 | 1,288,796 | 1,195,322 | 1,282,295 |
| Growth YoY | 17.7% | 8.8% | 10.7% | 68.6% | -7.3% | 7.3% | |
| Return on Invested Capital % | 25.8% | 24.8% | 25.7% | 20.9% | 7.0% | 5.7% | 12.5% |
| Cash Conversion Cycle | 63 | 37 | 58 | 71 | 110 | 120 | 20 |
| Days In Inventory | 127 | 74 | 95 | 93 | 122 | 125 | 62 |
| Days In Receivables | 14 | 15 | 12 | 12 | 14 | 17 | 16 |
| Days Payable Outstanding | 77 | 52 | 49 | 34 | 26 | 21 | 57 |
| Earnings per share (Reported) | 0.209 | 0.239 | 0.271 | 0.243 | 0.114 | 0.082 | 0.234 |
| Growth YoY | 14.6% | 13.2% | -10.1% | -53.1% | -28.1% | 185.1% | |
| Earnings per share (Adjusted for capital changes) | 0.209 | 0.239 | 0.271 | 0.243 | 0.114 | 0.082 | 0.234 |
| Growth YoY | 14.6% | 13.2% | -10.1% | -53.1% | -28.1% | 185.1% | |
| LEVERAGE and COVERAGE | 2016-06-30 | 2017-06-30 | 2018-06-30 | 2019-06-30 | 2020-06-30 | 2021-06-30 | 2022-06-30 |
| Total Debt | 69,820 | 82,298 | 37,022 | 23,903 | 523,016 | 393,536 | 391,245 |
| Growth YoY | 17.9% | -55.0% | -35.4% | 2088.1% | -24.8% | -0.6% | |
| Net Debt | 0 | 0 | 0 | 0 | 81,542 | 0 | 0 |
| Interest Expense | (3,711) | (4,663) | (2,670) | (1,836) | (26,109) | (21,100) | (19,343) |
| Growth YoY | 25.7% | -42.7% | -31.2% | 1322.1% | -19.2% | -8.3% | |
| Debt / EBITDA | 0.3 x | 0.3 x | 0.1 x | 0.1 x | 2.0 x | 1.8 x | 1.2 x |
| EBITA/Interest | 52.8 x | 44.7 x | 88.0 x | 115.2 x | 4.6 x | 4.3 x | 10.9 x |
| RCF to Net Debt % | — | — | — | — | 3 | — | — |
| FCFF to Debt % | 209.8% | 191.6% | 334.7% | 439.9% | 27.9% | 62.1% | 174.2% |
| CASH FLOW | 2016-06-30 | 2017-06-30 | 2018-06-30 | 2019-06-30 | 2020-06-30 | 2021-06-30 | 2022-06-30 |
| Unlevered Free Cash Flow | 146,494 | 157,691 | 123,908 | 105,151 | 145,783 | 244,307 | 681,442 |
| Growth YoY | 7.6% | -21.4% | -15.1% | 38.6% | 67.6% | 178.9% | |
| Cash Return on Invested Capital % | 27.2% | 24.9% | 18.0% | 13.8% | 11.3% | 20.4% | 53.1% |
| Dividend Payout % | 55.07% | 48.07% | 42.46% | 47.24% | 65.64% | 30.43% | 42.69% |
| Dividends per share (Reported) | 0.115 | 0.115 | 0.115 | 0.115 | 0.075 | 0.025 | 0.100 |
| Growth YoY | 0.0% | 0.0% | 0.0% | -34.8% | -66.7% | 300.0% | |
| Dividends per share (Adjusted for capital changes) | 0.115 | 0.115 | 0.115 | 0.115 | 0.075 | 0.025 | 0.100 |
| Growth YoY | 0.0% | 0.0% | 0.0% | -34.8% | -66.7% | 300.0% | |
| Free Cash Flow per share | 0.223 | 0.240 | 0.188 | 0.160 | 0.222 | 0.371 | 1.036 |
| Growth YoY | 7.6% | -21.4% | -15.1% | 38.6% | 67.6% | 178.9% |
| Fiscal year ends 30 Jun | Sept 2022 (FQ1) | Jun 2022 (FQ4) | Mar 2022 (FQ3) | Dec 2021 (FQ2) | Sept 2021 (FQ1) | Jun 2021 (FQ4) | Mar 2021 (FQ3) | Dec 2020 (FQ2) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 379.09M | 481.20M | 329.34M | 427.17M | 81.38M | 209.83M | 262.87M | 245.96M |
| Growth YoY | 365.80% | 129.32% | 25.28% | 73.68% | -73.81% | 20.46% | -24.31% | -50.32% |
| Cost of Goods Sold | 230.60M | 290.04M | 199.39M | 267.56M | 54.60M | 128.64M | 166.22M | 152.03M |
| Growth YoY | 322.32% | 125.47% | 19.95% | 75.99% | -71.71% | 7.13% | -16.47% | -48.76% |
| Gross Profit | 148.49M | 191.16M | 129.95M | 159.62M | 26.78M | 81.20M | 96.65M | 93.93M |
| Growth YoY | 454.45% | 135.42% | 34.46% | 69.93% | -77.24% | 50.03% | -34.84% | -52.66% |
| Operating Expenses | 79.65M | 83.73M | 82.80M | 73.49M | 43.04M | 62.87M | 74.98M | 72.72M |
| Growth YoY | 85.05% | 33.17% | 10.44% | 1.05% | -48.55% | -4.09% | -36.54% | -37.88% |
| Operating Income | 68.85M | 107.43M | 47.15M | 86.13M | -16.26M | 18.33M | 21.67M | 21.21M |
| Growth YoY | 523.41% | 486.21% | 117.55% | 306.09% | -147.77% | 260.37% | -28.19% | -73.93% |
| Other Income (Expense) | - | - | - | - | - | - | - | - |
| Growth YoY | - | - | - | - | - | - | - | - |
| Net Profit | 48.86M | 77.46M | 32.62M | 60.89M | -16.86M | 10.50M | 12.19M | 10.65M |
| Growth YoY | 389.74% | 638.06% | 167.56% | 471.60% | -181.39% | 162.33% | -26.62% | -80.91% |
| Diluted EPS | 0.07 | 0.12 | 0.05 | 0.09 | -0.03 | 0.02 | 0.02 | 0.02 |
| Growth YoY | 390.23% | 635.63% | 168.11% | 471.60% | -181.27% | 162.50% | -26.88% | -80.90% |
| Diluted Average Shares | 657.91M | 657.91M | 657.91M | 657.91M | 657.91M | 657.91M | 657.91M | 657.91M |
| Normalised EBITDA | 97.07M | 136.26M | 79.85M | 113.25M | 11.61M | 48.40M | 49.64M | 53.10M |
| Margin Analysis | ||||||||
| Gross Margin % | 39.17% | 39.73% | 39.46% | 37.37% | 32.91% | 38.70% | 36.77% | 38.19% |
| Operating Expenses % | 21.01% | 17.40% | 25.14% | 17.20% | 52.89% | 29.96% | 28.52% | 29.57% |
| Operating Income % | 18.16% | 22.33% | 14.32% | 20.16% | -19.98% | 8.73% | 8.25% | 8.62% |
| Net Profit % | 12.89% | 16.10% | 9.90% | 14.25% | -20.72% | 5.00% | 4.64% | 4.33% |
Corporate Development
Apart from those mentioned elsewhere in this report, there have been no significant new developments in the group.
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