HLG: 30 May 2008 Padini Holdings Bhd

HLG: 30 May 2008 Padini Holdings Bhd - Strong domestic sales; Maintain BUY



Padini Holdings Bhd BUY



Price target RM4.40



Share price at 29 May RM3.16



Investment summary


Q308 results were 22% above HLG/consensus, and re-affirms our BUY rating on the stock. We still like Padini given: (1) short-term domestic growth driven by same-store sales growth and store expansion; (2) its retail franchise expansion overseas could provide the next leg of growth; (3) cheap valuations vs. regional peers, at FY08 PE of 9x with 3-year EPS CAGR of 26%.



We are neutral on Malaysia’s consumer sector, given the looming inflationary pressure offsetting GDP growth and public sector pay hikes. For sector exposure, we prefer mass-market retailers, rather than makers of big-ticket items (eg. cars, housing, white goods).


Results beat the Street
Share price has risen +30% since our initiation in Aug07, but we still believe there is sufficient upside to retain a BUY: (1) quarterly EPS continues to beat the mkt; (2) valuations are still just half of its HK peers, despite regional brand scalability.