PADINI HOLDING BERHAD1.0 COMPANY PROFILE1.1 Background of the
companyPadini is a Malaysian-domiciled investment-holding company
headquartered in HicomGlenmarie Industrial Park, Shah Alam.
Incorporated in 1971 as proprietorship under the trade name Hwayo
Garments Manufacturers Company, Padini was initially engaged in the
manufacture and wholesale of ladies wear. The company subsequently
added mens and childrens lines to its offerings when it established
its first three brands from 1975 1987. In 1988, Padini discarded
its role as wholesaler to take up the role of consignor.
Thereafter, the first single-brand store distributing Seed was
opened in 1992 in Sungei Wang Plaza, Kuala Lumpur.The company has
nine labels in its family of brands and retail in 330 freestanding
stores, franchised outlets and consignment counters in Malaysia and
around the world. The companys subsidiaries include Vincci Ladies
Specialties Centre Sdn. Bhd., which is engaged in dealing of ladies
shoes and accessories; Padini Corporation Sdn Bhd., Seed
Corporation Sdn. Bhd., Yee Fong Hung (Malaysia) SendirianBerhad
(Yee Fong Hung) and Padini International Limited, which is engaged
in dealing of garments and ancillary products; Padini Dot Com Sdn.
Bhd. (Padini Dot Com), which is engaged in provision of management
services, and Mikihouse Childrens Wear Sdn. Bhd. (Mikihouse), which
is engaged in dealing of childrens garments, maternity wear and
accessories.Tizio was introduced to the public with the opening of
its first outlet in Mid Valley Megamall in Nov 2012 and
subsequently in Paradigm Mall on 23 May 2013. Like almost all of
the Groups Brands, Tizio was developed in-house by, and is
registered to the group. Anticipate more presence from Tizio in the
coming years as the brand has been slated to become an addition to
the groups portfolio of core brands.On 5 March 1998, the group was
listed on the Second Board of Bursa Malaysia Securities Berhad
(Bursa) and thereafter, transferred to the Main Board on 4 August
2004. The Main and Second Boards merged on 3 August 2009. Major
shareholders of the group as at 8 July 2013 are Pang Chaun Yong
with 44% and Skim Amanah Saham Bumiputera with 5.0%.
HAJI SAHID BIN MOHAMED YASIN(CHAIRMAN)YONG PANG
CHAUN(MANAGINGDIRECTOR)FOO KEE FATT(DIRECTOR)CHEONG CHUNG
YET(DIRECTOR)CHAN KWAI HENG(DIRECTOR)CHONG CHIN LIN(DIRECTOR)YONG
LAI WAH(DIRECTOR)YEAP TIEN CHING(DIRECTOR)1.2 organizational
charts
(Organisation chart been done by our group)
1.3 company structure
2.0 GENERAL ENVIRONMENT ANALYSIS 2.1 Political factorIn order to
improve consumers spending in the clothing industry, "Mega Carnival
Sale" has been implemented by the Malaysian government is to be
held 3 times a year. Its main purpose is to promote Malaysia as a
"value for money shopping destination". This aggressive approach
attracts the tourist to shop at the local apparel outlets, which in
turn would increase foreign tourist spending and increases our
country's foreign exchange earnings. This would also encourage the
Malaysians to shop locally, which would benefit Padini Holdings Bhd
in terms of their sales. This has created an opportunity for the
domestic companies. However the side effect of such activities
would stimulate the domestic economy and increases the number of
competitors in the domestic market. Nevertheless, Padini Holdings
would still stand out as market leader.Through ETP projects and
initiatives, the Malaysian Government plans to boost Malaysians
income level. Padini should be able to realize on the growing of
Malaysian affluent as many can afford to purchase higher priced
items besides the value products that the group offers. The
incremental of wealthy and thriving consumer base has allowed
brands such as Padini, Padini Authentic and Seed to obtain higher
revenue. The group can take this advantage to strengthen its single
brand stores into multi- brand concept stores, where consumers gain
access to all of Padinis in - house brand collections
2.2 Economic factorMalaysia's economic growth is to be has been
unstable fluctuating from -1.5 to -2.6 from 2008 to 2010. The
highest growth was during the period of March to September 2009
which increases from 7, 8 to 5.7. The economic growth is expected
to be due to the domestic market with growth in the private sector.
The private sector makes up the majority of the Malaysian economy,
with private consumption accounting for nearly 44% of GDP. "Love
Malaysia, Buy Malaysia" campaign was launched to by the government
to get Malaysians to support domestic market and take holidays in
local tourist sites. The government also subsequently launched a
national campaign on wise spending, with the aim to educate
consumers on the importance of domestic demand on the GDP growth
and economic recovery as a whole. 2.3 Social factorMalaysian is
classified as an upper middle-income country, and considered as one
of the most developed among the developing countries. Middle income
households defined as those earning between RM1, 500 and RM3, 500
per month, and has increased from 32.3% of total household
population in 1995 to 37% in 1999. The low-income group,
categorized by household income of up to RM1, 500 per month, spends
a proportion of this amount on food. Meanwhile, the high and middle
income households spend most of their money at hypermarkets. 3.4%
of their income is spent on clothing and foot wear. Malaysia's
consumers' lifestyle has been changing for the better due to the
rise in education levels. High profile retailers as well as global
mass media have shaped consumers buying behaviour, resulting in the
Malaysians being more westernized. The Malaysian's life leisure
life revolves around trendy shopping malls. Therefore Padini
Holdings Bhd has to be more update with the latest trends. They
have to advertise and keep the consumers informed and reminded that
they still exist and provide the customers with quality and trendy
clothes.
2.4 Technological factorWith the Internet and e-commerce,
retailers can now sell their products online and deliver it to
customers on their door-step efficiently within a timely manner. It
can make customers' life more convenient as they do not need to get
their house to go purchase a product in the hypermarket and making
the purchase at the comfort of their own home. Furthermore,
retailers can also sell their products to the overseas market
without the need to open a physical store in the foreign country.
This helps Padini Holdings to earn more profit using online
intermediaries and cut costs by not establishing new stores in
certain areas.
2.5 Environment factorEnvironmental changes have a major impact
on virtually all products, services, markets, and customers. In
Padini, environmental factors affect a lot in trends, which
customer nowadays up to date with fashions. In addition, new trends
are creating a different type of consumer and, consequently, need
for a different products, services and strategies. So, Padini is in
line because they provide variety of products to satisfy the need
of customer. Environment factor such as weather also affected the
Padinis sales where generally fluctuate with seasonal festivities
such as Hari Raya, Christmas and the Chinese Lunar New Year.
Nationwide sales programs such as the Malaysian Mega-Sale and
Merdeka Sale are also potent revenue drivers. But, during quiter
periods with no festivities (typically every 4Q of Padinis FY or
Apr-Jun quarter), the group sees comparatively lower sales figures.
However, this is a known characteristic of the retail industry and
is not expected to have substantial impact on Padinis overall
financial performance.
2.6 Legal factorPadini has a large product offering for its
customers. It offers luxury and high fashion items that cater to
upmarket consumers (Seed, Padini, Vincci+),affordable, core value
garments for the lower to middle income earners (Brands Outlets,
Vincci, Padini Authentics),and its own childrens and maternity wear
(Miki). It recently started to offer childrens wear under Seed and
Padini. Therefore, these brands has been credited by the
Association of Accredited Advertising Agencies of Malaysia (4 As)
incollaboration with Interbrand the worlds leading brand consultant
to be the Malaysias 30 most valuable brands.
3.0 TASK ENVIRONMENT ANALYSIS3.1 Porter 5 Forces Analysis1.
Threat of new entrants high.Malaysia is becoming an important
expansion base for Western retailers. Even as big retail brands and
labels focus their attentions on the emerging markets of China,
India or even our ASEAN neighbours, they too have seen it fit to
establish a presence in Malaysia as well. Increasingly, Malaysia
will see more international retailers venturing into the market
directly as opposed to via the traditional gateways of Hong Kong
and Singapore. In the past year itself, there has been an influx of
international brands, which compete on the same playing field as
Padini, the most recent being Japanese behemoth Uniqlo and Swedish
fashion retailer H&M, which have opened their flagship stores
in the Golden Triangle. We believe that given the growing size of
the pot, the main barrier to entry would be with regards to the
prime retail space which is getting scarce. 2. Bargaining power of
buyers high. The rising income levels, better education and greater
access to a variety of brands and labels have resulted in a class
of consumers more sophisticated in their needs and preferences.
Where customer loyalty is of the utmost importance, retailers have
strived to attain superior customer responsiveness by employing
various methods of advertisements and promotions, loyalty
programmes, as well as to increase customers perceived value of a
brand. Brands catering to this expanding group of consumers have
become numerous but more often than not, these brands pay more
attention to the pricing strategies than to the perceived quality
of the products under their brands. As a result, many brands fail
rather than thrive.3. Bargaining power of suppliers low. As with
the trend in the fashion retail industry, Padini designs its
garments while outsourcing the manufacturing operations to OEM
manufacturers. Knitwear and graphic Ts are manufactured locally
while the more complex woven items are sourced from China and Sri
Lanka. With the advent of the global slowdown, the garment
manufacturing industry in China has become saturated and oversupply
issues have more than mitigated the effects of minimum wage
rebasing. Thus far, bargaining power of suppliers has remained low,
and as a result, large scale Chinese manufacturers who had
previously shunned the small to mid-sized fashion retailers have
reopened their doors to Padini.4. Threat of substitute products
medium. Padinis products cater to a wide range of audiences, the
more pronounced differences being the styles and pricing of the
brands they carry. The SEED and Padini brands are trendier while
the PDI and Vincci brands are more neutral. The brands outlets
products, on the other hand, houses lesser-known value-for-money
labels, which include off-season and surplus branded items. We
believe that Padinis differentiated products as well as its
flexibility of varying its merchandise mix provides the group with
some degree of immunity, though it is note-worthy that the Vincci
accessories are not generally designed in-house, which means these
products no longer retain their unique qualities. In this
situation, these ranges of products runs the risk of attracting the
interest of supplies eager to broaden their distribution as well as
competitive retailers anxious to boost their own sales.5.
Competitive rivalry within the industry high. The garment retail
industry is by nature, one of the most competitive areas of
commerce. Competition is particularly apparent where there are
numerous other brands, which operate at the same locations as
Padini. These brands compete not only for market share and floor
space, but also for front line retail staff, which is becoming
increasingly scarce. The increased demand for staff required to run
retail operations extends beyond fashion retailing, and the current
rapid growth in retail outlets of all kinds has caused high
turnover rates for front line staff, which has in turn made
recruitment costly, time-consuming and often unproductive.
Management has envisaged that the coming years will see the
situation deteriorate further if nothing is done to radically after
the conditions of demand and supply of labour in this industry.
4.0 SWOTSWOT TABLE: PADINI HOLDINGS BERHAD
Internal: StrengthsInternal: Weaknesses
S1S2S3S4S5Leading brand in MalaysiaMany retail outlets Market
leadershipPromising qualityProduct for all agesW1W2
Unstable profitsNo online shopping
External: OpportunitiesExternal: Threats
O1O2O3O4
Expands their businessPrioritize local companiesOpen more
branchesEarn more profitT1T2T3New to marketIncrease competitionNo
celebrity endorsement
4.1.1Strengths 1. Leading brand in MalaysiaPADINI is a leading
brand in Malaysia. There are wide range in style and pricing of the
brands that PADINI carry. For examples, PADINI carries SEED,
Vincci, Mikihouse and etc. the products not only trendy but also
neutral which is suitable for all type of consumers. 2. Many retail
outletsThere are in total of 330 retail outlets in Malaysia and
around the world for Padini Holding Berhad. With many retail
outlets, PADINI is making sure that they are unbeatable for their
competitors. 3. Market leadershipPADINI is among the well-known
brand established since 1971 in Malaysia. It strategically located
factories and warehouses ensure wide market coverage in Malaysia.
4. Promising qualityPADINI ensure the quality of their product is
in higher aspect for their brand and in-house brands under them. 5.
Products for all agesWith in-house brands under PADINI, they ensure
that their product is suitable for all ages of consumers.
4.1.2 Weaknesses 1. Unstable profitsIn retailer business, the
profit is unstable. The consumers are depending on the season. In
Malaysia, the profit will be at the highest peak when there is
festiveseason. For example: Chinese New Year. 2. No online
shoppingAnother weakness for PADINI is no online shopping. For
customer, they can only buy Padinis product in stores which is not
a very convenience for the customer. It is because, not the entire
customer is in the city and near to shopping complex. 3. Public
perception (low quality)In retailer business, the perception of
public in term of fabric is in a low quality.
5.0 TOWSTOWS TABLE: PADINI HOLDINGS BERHAD
INTERNAL FACTORSStrengths SWeaknesses W
EXTERNAL FACTORSS1
S2S3S4S5Leading brand in MalaysiaMany retail outletsMarket
leadershipPromising qualityProduct for all agesW1W2
Unstable profitsNo online shopping
Opportunities OSO StrategyWO Strategy
O1O2O3O4Expands their businessPrioritize local companiesOpen
more branchesEarn more profit(s3 + o1)Using the power as market
leadership to expand their business (horizontal)(w2 + o3)Placing
more branches to cover loss of potential online customer (market
dev)
Threats T ST StrategyWT Strategy
T1T2T3New to marketIncrease competitionNo celebrity
endorsement(s1 + t3)
(w1 + t2)
STRATEGIC DIRECTION 5.1.1 SO Strategy: Using the power as market
leadership to expand their business.As a market leader in the
retail business, PADINI has a huge power and opportunity to expand
their business to the next level. With this, PADINI has the power
to control over 5.1.2 WO Strategy: Placing more branches to cover
loss of potential online customer.PADINI is a well-known brand in
retail business which is clothing, accessories, shoes, childrens
clothing and etc. within this areas of business, potential
customers is more interested in window shopping rather than online
shopping. It is a good strategy for PADINI to open more branches in
order to attract potential customer on self-satisfaction. 5.1.3 ST
Strategy: Even though without the celebrity endorsement, PADINI
still manage to be the lead brand in Malaysia. Thats mean; the
power of the brand itself is powerful enough to cover the treats in
the business. To strengthen the brand, PADINI should consider
offering an endorsement to the icon celebrity. 5.1.4 WT
Strategy:
6.0 RATIO ANALYSIS PROFITIBILITY RATIO20112012
Return on Total Assets (ROA) = Net Income Total Asset = 75,694
444,339 = 0.17 = 96,001 482,305= 0.20
Return on Equity (ROE) = Net Income Total Stockholders
Equity
= 75,694 340,109 = 0.22 = 96,001 282,677= 0.34
Return on Investment (ROI) = Net profit After tax and interest
Total Assets = 75,694 444,339 = 0.17= 96,001 482,305= 0.20
Earning Per Share = Net Income Number of shares of Common stock
outstanding = 75,694 131,582= 0.58= 96,001 657,910= 0.15
6.1 Ratio of the company for 2011 and 2012
6.2 Analysis of ratioRatio analysis is used to evaluate
relationships among financial statement items. The ratios are used
to identify trends over time for one company or to compare two or
more companies at one point in time. Return on total Assets (ROA),
is a financial ratio that shows the percentage of profit that a
company earns in relation to its overall resources (total assets).
Return on assets is a key profitability ratio which measures the
amount of profit made by a company per dollar of its assets. It
shows the company's ability to generate profits before leverage,
rather than by using leverage. ROA measurements include all of a
company's assets including those which arise from liabilities to
creditors as well as those which arise from contributions by
investors. So, ROA gives an idea as to how efficiently management
use company assets to generate profit, but is usually of less
interest to shareholders. For Return on Equity (ROE), is the amount
of net income returned as a percentage of shareholders equity. It
reveals how much profit a company earned in comparison to the total
amount of shareholder equity found on the balance sheet. ROE is one
of the most important financial ratios and profitability metrics.
It is often said to be the ultimate ratio or the mother of all
ratios that can be obtained from a companys financial statement. It
measures how profitable a company is for the owner of the
investment, and how profitably a company employs its equity.
Furthermore, The higher the ROE the better. But a higher ROE does
not necessarily mean better financial performance of the company.
For stable economics, ROEs more than 12-15% are considered
desirable. But the ratio strongly depends on many factors such as
industry, economic environment (inflation, macroeconomic risks,
etc.).In Padini Holding Berhad year 2012 is shown the better than
2011 because have a higher ratio. Next, Return on investment (ROI)
for the company is higher in 2012 that is 0.20 than in 2011 is
0.17. It indicated that investment gains compare favourably to
investment costs. Return on investment (ROI) is performance measure
used to evaluate the efficiency of investment. It compares the
magnitude and timing of gains from investment directly to the
magnitude and timing of investment costs. It is one of most
commonly used approaches for evaluating the financial consequences
of business investments, decisions, or actions. If an investment
has a positive ROI and there are no other opportunities with a
higher ROI, then the investment should be undertaken.Lastly Earning
per share ratio, is generally considered to be the single most
important variable in determining a share's price. It is also a
major component used to calculate the price-to-earnings valuation
ratio. In addition, Earning per share is the portion of a company's
profit allocated to each outstanding share of common stock.
Earnings per share serves as an indicator of a company's
profitability. Ratio for 2012 is higher than 2011 in Padini Holding
Berhad indicated that company would be more efficient at using its
capital to generate income and, all other things being equal, would
be a "better" company. Investors also need to be aware of earnings
manipulation that will affect the quality of the earnings number.
It is important not to rely on any one financial measure, but to
use it in conjunction with statement analysis and other
measures.The conclusions is, for the company Padini Holding Berhad
performance are more better and increases year by year as we can
see the ratio in 2012 given a better result than 2011. It shown
that a company's ability to meet short-term debt obligations,
company's ability to meet its short-term obligations using its most
liquid assets, company's ability to repay its obligations, how
effectively and efficiently a company is using its fixed assets to
generate revenues, how efficiently a company uses its resources,
materials, and labour, company's ability to generate profits before
leverage, and more efficient at using its capital to generate
income. GRAPH 1: Comparison between 2011 GRAPH 2: Comparison
between 2011 and 2012 Return on Asset ratio(ROA). and 2012 Return
on Equity Ratio(ROE)
GRAPH 3: Comparison between 2011 GRAPH 4: Comparison between
2011 and 2012 Return on Investment Ratio(ROI). and 2012 Earning Per
Share Ratio(EPS).
LIQUIDITY RATIO20112012
Current Ratio = Current assets Current Liabilities = 349,754
137,947= 2.54= 380,266 120,393= 3.16
Quick Ratio = Current Asset Inventory Current Liabilities =
349,754 170,955 137,947= 1.30 = 380,266 192,285 120,393 = 1.56
Current Ratio for 2012 is higher than 2011 that is 3.16
different from 2011 that is 2.54. Current ratio indicates that a
company's ability to meet short-term debt obligations. The current
ratio measures whether or not a firm has enough resources to pay
its debts over the next 12 months. In addition, the current ratio
can also give a sense of the efficiency of a company's operating
cycle or its ability to turn its product into cash. The higher the
ratio, the more liquid the company is. Quick Ratio also shown the
same where in 2012 the ratio is higher than in 2011. It indicates a
measure of a company's ability to meet its short-term obligations
using its most liquid assets .Quick ratio is viewed as a sign of a
company's financial strength or weakness; it gives information
about a companys short term liquidity. The ratio tells creditors
how much of the company's short term debt can be met by selling all
the company's liquid assets at very short. So,the higher the quick
ratio, the better the position of the company. The commonly
acceptable current ratio is 1.
LEVERAGE RATIO20112012
Debt to = Total debt total asset Total Asset ratio
= 161,662 444,339 = 0.36 = 142,196 482,305 = 0.29
Debt to = Total debt Equity ratio Total stockholders equity
= 161,662 340,109 = 0.48 = 142,196 282,677= 0.50
LTD to = Long Term Debt Equity ratio Total stockholders equity=
23,715 340,109= 0.07= 21,803 282,677= 0.08
Times interest = EBIT Earned ratio Total interest charged =
105,057 1,573= 66.79
= 130,649 2,328 = 56.12
Inventory turnover = Sales Inventory
= 568,476 170,955 = 3.33 = 723,411 192,285= 3.76
Fixed Asset Turnover = Sales Fixed Asset = 568,476 94,585 =
6.01
= 723,411 102,039= 5.57
Total Asset Turnover = Sales Total Asset = 568,476 444,339 =
1.28 = 723,411 482,305= 1.18
Debt to equity ratio is a financial ratio indicating the
relative proportion of entity's equity and debt used to finance an
entity's assets. This ratio is also known as financial leverage. In
addition Debt-to-equity ratio is the key financial ratio and is
used as a standard for judging a company's financial standing. It
is also a measure of a company's ability to repay its obligations.
Lenders and investors usually prefer low debt-to-equity ratios
because their interests are better protected in the event of a
business decline. Thus, companies with high debt-to-equity ratios
may not be able to attract additional lending capital. So, 2012 is
better than 2011 because have a lower amount of ratio that is 0.29.
An inventory turnover ratio showing how many times a company's
inventory is sold and replaced over a period. A low turnover
implies poor sales and, therefore, excess inventory. A high ratio
implies either strong sales or ineffective buying. High inventory
levels are unhealthy because they represent an investment with a
rate of return of zero. It also opens the company up to trouble
should prices begin to fall. So, ratio in 2012 is higher than 2011
it indicated that 2011 is better for a companys inventory is sold
and replaced over a period. Fixed asset turnover ratio compares the
sales revenue a company to its fixed assets. This ratio tells us
how effectively and efficiently a company is using its fixed assets
to generate revenues. This ratio indicates the productivity of
fixed assets in generating revenues. If a company has a high fixed
asset turnover ratio, it shows that the company is efficient at
managing its fixed assets.Fixed assets are important because they
usually represent the largest component of total assets. So, in
2011 the company have a higher ratio than 2012 it indicates that in
2011 the company is more efficient at managing its fixed
assets.
Bargaining Power of Buyer HighSpending behaviour is affected by
their income level Depends on economic condition against Income
levelAware of consumer rightsLow swithching cost to other similar
brands. Threat of New Entrance High New entrants have limited
access to distribution channels as most of the first tier retail
malls are fully occupied. Difficult to build brand loyalty and
delivering quality as Malaysian consumer are less
price-sensitive.Issues with front-line service recruitment as small
local brands cant compete with mega firm and foreight brands on
talents recruitment PADINIS PORTER FIVE FORCES
Rivalry within the industry moderate Rising revenue from past 4
years due to Padini has successfully captured the niche and grow
its business consistenly due to rising affluence among consumers.
Growing of Brands Outlet had successfully captured the mass market
but growing significantly in PBT form 1% to 17% in year 2011.More
foreign brands penerated to Malaysia last 4 years .
Bargaining Power of Supplier Moderate Padini control the design
of its apparel & shoes while outsource its manufacturing
services to 10 OEM companies Shoes and Graphical T-shirt are
manufactured in Malaysia OEM while jeans and slack are sourced form
china Planning to outsource its future apparel.Further reduce
suppliers bargaining power. Threat of Substitute Low Apparel
industry is a saturated and matured market where it is basic needs
for the living Threats of e-commerce seen prevaling as online
shopping trendskicks in over the past 10 years but pricing
relatively low on its product due to low operation cost.Padini
counter-attack by ramping up its facebook fanpage wih latest
designs at discounted rate based on term and conditions. It has
227,000 fans up to date.