PADINI HOLDINGS
8 August 2012
(PAD MK, PDNI.KL)
Master Franchise Agreement in Indonesia SEALED!
BUY
Company report
Price: RM2.17
Fair Value: RM2.15 (under-review)
AmResearch Sdn Bhd
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Rationale for report : Company Update
Quick Take
YE to Jun
Core EPS (Sen)
PE (X)
FY11
FY12F
FY13F
FY14F
11.3
19.5
12.8
17.3
15.3
14.5
16.1
13.7
Source : AmResearch
•
It was announced on Bursa Malaysia yesterday that an exclusive 10-year deal to distribute VNC
women’s shoes and accessories in Indonesia has finally been signed between Padini Holdings and
Singapore’s FJ Benjamin Group. The Vincci products, produced by Padini, will be sold under the
brand name of VNC in Indonesia.
•
Under this deal, through FJ Benjamin’s associate, PT Gilang Agung Persada, targets to open 25
stores within a period of five years in Indonesia (with investments ranging from RM0.9mil to RM1.2mil
per store). Padini’s management expects five stores to be opened in the first year of operations. The
first store is expected to open in December this year. VNC will run like a franchise, whereby FJ
Benjamin is solely responsible for both capital expenditure and marketing requirements.
•
We are positive and excited about this partnership given FJ Benjamin’s established presence for over
30 years in Indonesia and more importantly, it has succeeded in building up many foreign brands
there. Furthermore, its associate PT Gilang Agung Persada has an intensive network of stores in
Indonesia, retailing foreign brands. This, we believe, enables Padini to penetrate into the Indonesia
market at a much faster pace.
•
Backed by such a strong partnership and Padini’s strength in product development, we opine the
VNC’s brand name would be propelled to a different level – underpinned by its immense knowledge
of the local market, strong experience in operating businesses in Indonesia as well as a track record
in managing global and regional brands.
•
We would not be surprised should the VNC products receive good or overwhelming response from
the Indonesia market, fuelled by affordable pricing and fashionable items. Notwithstanding this,
Indonesian customers will enjoy the same extensive range of VIncci products as their counterparts in
Malaysia. All new products will be launched simultaneously in both countries.
•
Given that sales to FJ Benjamin is at a cost-plus basis, the impact on Padini’s earnings is minimal in
the near- to medium-term, unless the distribution network grows considerably large in Indonesia. We
see potential in earnings contributions from this deal in the long term.
•
We maintain our BUY rating on Padini with an upside bias pending a discussion with management.
Our DCF-based fair value of RM2.15/share is currently under review. The FY12 result is expected to
be released at month-end. We continue to like Padini for its strong franchise value and sustainable
robust earnings growth.
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AmResearch Sdn Bhd (335015-P)
(A member of the AmInvestment Bank Group)
15 th F l oor B a ng un an Am B a nk Gr ou p
55 Jalan Raja Chulan
50200 Kuala Lumpur
Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s e a r c h )
F a x: ( 03 ) 2 07 8- 3 16 2
PP 12260/06/2013(032378)
For AmResearch Sdn Bhd
Benny Chew
Managing Director
8 August 2012
Padini Holdings
TABLE 1 : VALUATION MATRIX
YE to Jun
Revenue (RMmil)
Core net profit (RMmil)
EPS (Sen)
EPS growth (%)
Consensus EPS (Sen)
DPS (Sen)
PE (x)
EV/EBITDA (x)
Div yield (%)
ROE (%)
Net Gearing (%)
FY10
FY11
FY12F
FY13F
FY14F
518.8
59.9
9.1
3.0
24.3
16.6
1.4
27.3
Net cash
568.5
74.7
11.3
24.7
4.0
19.5
13.7
1.8
28.9
Net cash
656.1
84.2
12.8
12.8
14.5
6.0
17.3
12.2
2.7
28.3
Net cash
741.8
100.6
15.3
19.4
16.5
6.0
14.5
9.9
2.7
29.3
Net cash
811.6
106.2
16.1
5.6
18.0
6.0
13.7
9.0
2.7
26.1
Net cash
Source : Company, AmResearch estimates
AmResearch Sdn Bhd
2