AmInvestment cuts earnings forecast for Padini, maintains 'buy' recommendation

TheStar Wed, Jun 03, 2020 09:38am - 3 years View Original


KUALA LUMPUR: AmInvestment Bank research slashed its earnings forecasts for PADINI HOLDINGS BHD on expectations of a very weak quarter ahead due to the movement control order shutdown.

"We cut our earnings forecasts by 11% for FY20F, 13% for FY21F and 16% for FY22F to account for the adverse impact of the Covid-19 pandemic," it said.

However, the research house, which maintained its "buy" recommendation on the counter, said sales would have started to pick during the conditional movement control order.

There would have also been a boost to sales during Hari Raya week where Padini's low price point would have been attractive to customers during tough economic conditions.

In 9MFY20, Padini recorded a 9% year-on-year drop in same store sales growth (SSSG). In 3Q alone, SSSG declined 20% y-o-y.

Moving forward, Padini has said that it will not be adding any new stores in 2020 and will focus on its online platform to grow sales, said AmInvestment.

"Padini does not expect any major issues from its supply chain. The biggest issue stemming from the Covid-19 pandemic is in generating sales as 99% of Padini’s stores are located in shopping malls.

"Padini expects to come out from the pandemic stronger, as smaller competitors might not be able to defend their market share," Aminvestment added.

The research house cut is fair value for Padini to RM3.02 from RM3.15 previously.
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