Monday, December 2, 2013

Why Padini is the leading Malaysian fashion retailer

There is no doubt that I like retail business and I like the leading player best. Hence there is no doubt that I have bought and sold some of them - like in buying into Bonia and Wing Tai.

The thing about retailing business is that I personally felt that Malaysia is doing extremely well. I in fact like Malaysian retailing than Singapore or Bangkok or Jakarta for that matter. In Asia, besides Hong Kong, there has been some positive work done by Malaysian retailing industry and I would in fact commend the good work partly due to the government's policies for retailers.

The one player targeting the middle income group which I do get attracted to and continue to do so is Padini, so much so that I am selling Bonia and buying more Padini this time around. The latest portfolio can be found here.

Why am I calling it the leader among the Malaysian retailers? It has executed well where the other Malaysian companies have yet to really achieve. The reporting season for the quarter ended Sep 2013 is just over and although I do not want to dwell too much on the results, Padini to me has been consistently performing. It is in fact the only one which has modelled and able to achieve the hugely successful model among players like Zara, Gap, H&M, Uniqlo etc. It is successful in selling its products through its own outlet and that to me is very important as relying too heavily on retailers like AEON and Parkson would have limited its growth.

In accounts, I am just as concerned about the assets as much as the liabilities. To me, cash where how fast the business can generate cash is very important and that goes with the receivables. Through its own outlets, it is almost cash business (for credit cards transactions). The most challenging part though would be the turnover i.e. how fast is it turning the inventories to cash. Over the last 8 quarters or more, I have noticed that Padini is able to achieve that consistency, which means that it has probably been very comfortable with its strategies of maintaining a certain level of inventory while able to bring in the sales. One way of looking at that is its inventory and receivables against sales. If a company is able to find that consistencies, that's amazing.

What has been successful for Padini is however a bit of concern for Parkson as shoppers nowadays seem to get to the idea of buying from a specialized retail shop. That means, traffic is getting away from retailers such as Isetan and Parkson. That seems to happen to Parkson in its last few quarters results although I am not so sure of Isetan. AEON is slightly different though.

What about DKSH and Malaysia Airport? Malaysia's strength in the retailing business seems to benefit them as well - as there are more people transacting and more people moving around, perhaps to shop i.e. between KL, Penang or KK and any other cities. That's definitely good for those 2 companies.

My money into Keuro? Really long term thingy, and it does not seem that the West Coast Expressway project is dropping. With that, I still feel that its current price is way too low for a highway concessionaire.

1 comment:

reyes430 said...

"Through its own outlets, it is almost cash business"

Does it mean that when a company has more consignment sales, receivable will be higher? I am looking on a company called YOCB, which their management of working capital is no way efficient like padini. Their receivable is getting higher and higher YOY as they retrived majority of their revenue from consignment sales. Would you mind to shed some light on this issue? Thanks so much