Padini Holdings : 3Q earnings on track to another record year BUY

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Padini Holdings : 3Q earnings on track to another record year      BUY

We maintain our BUY recommendation as we raise our fair value to RM3.60/share (vs. RM3.18 previously). Our fair value is derived from a higher PE multiple of 15x pegged to CY18 EPS. We believe Padini deserves to trade at a premium to its 5-year mean valuations due to its increasingly reliable execution, sustained growth and robust balance sheet. Padini’s reported 3QFY17 earnings of RM34.8mil (YoY: -0.9%) brought 9MFY17 earnings to RM117.9mil (YoY: +18%). It is in line with ours but ahead of consensus, at 76% and 79% of estimates respectively.

An interim and special dividend, amounting to 4.0 sen/share was announced. In view of its record-breaking performance, the group declared an additional special dividend of 1.5 sen/share. YTD DPS amounting to 9.0 was as expected. We were pleasantly surprised by Padini’s SSSG in the region of an estimated mid-single-digit percentage growth. It is no small feat given it is off a high FY16 base. Combined with an expected c:15% or 13 more stores, it drove 9.2% YoY revenue growth for the quarter. Meanwhile, cumulative SSSG sustained above 10%. We are highly encouraged by Padini’s resilient branding and constant innovation to consistently grow store sales. It is reflective of management’s purposeful execution. It lends confidence to management's plans to expand Padini regionally. We wait for further details of the regional venture.

Others :

Kimlun Corporation : 1QFY17 net profit declines 10% YoY               BUY

CB Industrial : Jump in retro-fitting earnings in 1QFY17    HOLD

DRB-Hicom : Smaller but still substantial losses                   HOLD

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ECONOMIC HIGHLIGHTS

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