Friday, August 26, 2016

Padini: Another mistake

I make many mistakes in investment and the sale of Padini is another mistake. I sold it for Airasia, which obviously was not a mistake but it was from a wrong stock sale to a right stock purchase. Padini achieves an amazing result, one that will be comparable against Airasia for this year.

I did not do enough checking. I did not go to the store anymore to look. In fact, when I saw the concept store in Mid Valley several months ago, I knew I already made a mistake. The store was full of people who shops, made payments not 1 piece of clothing but several. They collected several hundreds of Ringgit from each and every customer. The queue for payment was long.

Why then did I sell it? I thought due to the economic slowdown and GST, it will impact all retailers. Yes, it does impact AEON, Tesco, Bonia, many brands in malls but not Padini.

How did it progress so much. It went for volume as opposed to margins. The display and design was made simpler. Prices was at RM19, RM29, RM39, RM49 - hence its product went lower end. I guess due to the economic reason and its mid-range branding, this strategy works. For how long more? This is a big question. Its business went for the FOS market in fact and it beat them hands down.

If it can continue with this momentum, I would have no doubt buy again even at the price of RM2.75 (now).

When I bought Padini, I have mentioned I like its business of moving from stores to its own stores. It has managed to do well collecting all its brands under one big store. Another thing that could potentially be of advantage to Padini is that perhaps rental has stopped increasing last year due to oversupply and more purchases are made through e-commerce.

It also has very strong cashflow as can be seen from results from several years.

Well, for those who still have the stock do check them out at the physical store. Do not just look at the numbers, announcements and dividends. It is a strong company - just that whether it can keep to the momentum!

Thursday, August 25, 2016

DKSH: 1H2016 webcast

I am still holding DKSH and on private note, in fact I bought more but in small quantum. It is a unique company with very little competitors in Malaysia. The only thing is it was not performing as well, but recently in the recent quarter results it managed to do better which causes its share price to rise recently. To be frank, I was not happy with its cashflow last 2 -3 years, but I feel that there are not that many similar opportunities just like this company. In its latest announcement, it terminated a telco business and it seems it replaces the business with a smaller telco. I am not sure who, but it seems that the margin was too small, hence the termination of the bigger telco.

I am not going to provide guidance, but one will need to understand the business better. From this webcast, you will know the uniqueness of the company although it is for entire Asia.

Listen to the webcast for DKSH's 1H2016 parent. Again, to invest one will need to understand the business.

I like its business, its strength and uniqueness. As countries (Malaysia included) push for consumption based economic growth, DKSH will benefit more. In the webcast, it says DSKH takes opportunity from companies who want to turn its fixed costs to variable costs, hence its engagement with DKSH who has larger and stronger presence to any company who wants to do business in those countries. More and more companies are focusing on what they do best, hence leaving DKSH on distribution and marketing.

There were many questions with regards to its competitors and according to the Group CEO, he sees only 2 major competitors - Li & Fung and Zuellig. Zuellig has presence in Malaysia but I do not see Li & Fung.

In future, I do see however China distribution company wanting a piece of the pie here in SEA region but it is not that easy to take DKSH's strength away.