CLOTHING retailer Padini Holdings Bhd, one of the bellwether Malaysian apparel retailers, reported recently that it achieved a record quarterly net profits of RM60.89 mil for its 2Q FY6/2022, boosted by full re-opening of the economy and the national COVID-19 vaccination programme.
A large-cap stock on Bursa Malaysia (current market cap: RM2.2 bil), brands under its wing such as Padini, Padini Authentics, PDI, Brand Outlet and P&Co drove the company’s revenue as demand for fast fashion picks up. Rental rebates and wage subsidies also contributed to its revenue stream.
JF Apex, one of the nine research houses that have Padini under their radar, sets the garment retailer’s target price at RM3.50 with its valuation now pegged at 27.8 times its financial year ending June 30, 2022’s price-to-earnings ratio (P/E) which is lower than its five-year average P/E of 30.1 times (due to lingering concerns that the unsettled COVID-19 situation might derail the country’s overall economic recovery).
Market consensus valued Padini within the range of RM3 to RM4 with an average PE of 35 times.
Bonia Corp Bhd, another leading fashion retailer, rebounded from a net loss of RM4.84 on its 1Q FY6/2022 to end its 2Q FY6/2022 ended Dec 31, 2022 at RM19.42 mil.
In recent trying times, Bonia has been seeking collaboration with local and international celebrities to create new products based on current trends while engaging a more aggressive promotional and marketing activities with the hope of boosting sales.
The group’s strategy was to consolidate some of its non-performing outlets and open up new ones in more strategic locations. Its latest flagship outlet at Suria KLCC combines a hybrid of art and fashion.
CGS-CIMB Research has set a target price of RM2.50 for Bonia’s on the back of the research house’s confidence that the company will do well in its long-term prospects.
Meanwhile, Cheetah Holdings Bhd which also released its quarterly results recently saw its earnings shot up 157% year on year (yoy) – an achievement which echoed market sentiments and in view of pent up demand and year-end festive factor.
The smallest yet the most agile of Malaysia’s apparel brand currently, Cheetah has captured the consumer space that its competitors have not ventured into, namely the second and third tier markets with huge demands for affordable wear (imagine 80% of Malaysia’s 32.7 million population).
Unconfirmed sources revealed that Cheetah’s commendable turnaround was also due to introduction of its new product lines. With already a presence at over 740 touch points in departmental stores and supermarkets throughout Malaysia, the company plans to open up two more additional flagship stores.
Stock price movement
Bonia has seen a spike in its share price since December 2021 which was possibly in anticipation of holiday season sales, up from 85.5 sen on Dec 1 last year to close at RM2.04 last Friday (Feb 25), a surge of 139%.
However, soon after its results announcement, its share prices dipped 17 sen on Friday (Feb 25) to close at RM1.87, a decrease of 8.33%. Bonia’s share price volatility is reflective of a 1.2 times beta accorded to the company by analysts’ consensus.
The volatility of Padini shares as the results of its quarterly results announcement is of lesser magnitude whereby within the same period, Padini which traded at RM2.79 closed a tad higher at RM3.12, an increase of 20.41% a day prior to its results announcement.
The day after its quarterly announcement, its share prices hit as high as RM3.50 – a price last seen on Feb 13, 2020 before closing at RM3.36. Comparing the price from the day of its quarter results announcement to market close on Friday, Padini’s share price has been up by 7.7%.
Padini and Bonia, which are categorised as a large-cap stock and mid-cap stock respectively on Bursa Malaysia, have all along received wide coverage from both analysts and media alike.
In contrast, Cheetah – the smallest in terms of market capitalisation – boasts a beta at 0.85 times and enjoyed the least analyst/media coverage among the three stocks. It saw its share prices rose 38% since Dec 1 last year to close at 16 sen on Friday (Feb 25), the day of its results announcement.
With a set of sterling, record high quarterly results and potential rewards awaiting shareholders from its impending bonus warrants issue, there is an upside potential to Cheetah’s currently depressed share prices which is well below its net tangible assets (NTA) per share of 38 sen.
If one would take into consideration the potential growth of its existing business which should be in line with its peer, Cheetah’s current share price should be at least close to its NTA per share value if not higher.
In addition, should the company indeed launched new product lines to boost its top line, a re-rating should be on the horizon after considering all the above-mentioned positive catalysts.
Cheetah’s share price should ultimately be re-rated to reflect the value of its new products on top of its existing business value.
More broadly, expectations for a continued consumer recovery trend should be reflected very strongly in these three garment retailers. – Feb 28, 2022
