PADINI HOLDING BERHAD

1.0 COMPANY PROFILE

1.1 Background of the company

Padini 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 men’s and children’s 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 company’s

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 Children’s Wear Sdn. Bhd. (Mikihouse),

which is engaged in dealing of children’s garments, maternity

wear and accessories.

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)

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 Group’s 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 group’s 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%.

1.2 organizational charts

(Organisation chart been done by our group)

1.3 company structure

2.0 GENERAL ENVIRONMENT ANALYSIS

2.1 Political factor

In 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.

PADINI HOLDING BERHAD Mikiho

use Children’s Wear

Sdn.Bhd

Padini Dot Com

Sdn.Bhd

Vincci Ladies

’ Specialties Centre Sdn.bh

d

Vincci Holdings

Sdn,bhd

The New

World Garmen

t Manufacturer Sdn.Bh

d

Yee Fong Hung (Malaysia) Sdn.Bh

d

Seed Corporation Sdn.Bh

d

Padini Corporation Sdn.Bhd

Padini Internationa

l Limite

d, Hong Kong

100%

100%

100%

100%

100%

100%

100%

100%

100%

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 Padini‟s in - house brand collections

2.2 Economic factor

Malaysia'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 factor

Malaysian 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 factor

With 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 factor

Environmental 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 Padini s 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 Padini s 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 Padini s overall financial performance.’

2.6 Legal factor

Padini 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 children s’and maternity wear (Miki). It recently started to offer children s wear’under Seed and Padini. Therefore, these brands has been credited by the

Association of Accredited Advertising Agencies of Malaysia (4 A s)’incollaboration with Interbrand the world s leading brand consultant to– ’be the Malaysia s 30 most valuable brands. ’

3.0 TASK ENVIRONMENT ANALYSIS

3.1 Porter 5 Forces Analysis

1. 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

customer’s 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. Padini’s 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

outlet’s products, on the other hand, houses lesser-known

value-for-money labels, which include off-season and

surplus branded items. We believe that Padini’s

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 SWOT

SWOT TABLE: PADINI HOLDINGS BERHAD

Internal: Strengths Internal: Weaknesses

S1

S2

S3

S4

S5

Leading brand in Malaysia

Many retail outlets

Market leadership

Promising quality

Product for all ages

W1

W2

Unstable profits

No online shopping

External: Opportunities External: Threats

O1

O2

O3

O4

Expands their business

Prioritize local companies

Open more branches

Earn more profit

T1

T2

T3

New to market

Increase competition

No celebrity endorsement

4.1.1 Strengths

1. Leading brand in Malaysia

PADINI 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 outlets

There 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 leadership

PADINI 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 quality

PADINI ensure the quality of their product is in higher

aspect for their brand and in-house brands under them.

5. Products for all ages

With in-house brands under PADINI, they ensure that their

product is suitable for all ages of consumers.

4.1.2 Weaknesses

1. Unstable profits

In 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 shopping

Another weakness for PADINI is no online shopping. For

customer, they can only buy Padini’s 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 TOWS

TOWS TABLE: PADINI HOLDINGS BERHADINTERNAL FACTORS Strengths – S Weaknesses – W

S1

S2

S3

Leading brand in

Malaysia

Many retail

outlets

W1

W2

Unstable

profits

No online

shopping

EXTERNAL FACTORS

S4

S5

Market

leadership

Promising

quality

Product for all

agesOpportunities – O SO Strategy WO StrategyO1

O2

O3

O4

Expands their

business

Prioritize local

companies

Open more branches

Earn 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 Strategy WT StrategyT1

T2

T3

New to market

Increase competition

No 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, children’s 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. That’s

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 RATIO 2011 2012Return on Total Assets (ROA) = Net

Income

Total

Asset

= 75,694

444,33

9

= 0.17

= 96,001

482,305

= 0.20

Return on Equity (ROE) = Net

Income

Total

Stockholders Equity

= 75,694

340,1

09

= 0.22

= 96,001

282,677

= 0.34

Return on Investment (ROI) =Net profit

After tax and interest

= 75,694

444,3

39

= 96,001

482,305

= 0.20

Total Assets

= 0.17

Earning Per Share = Net Income

Numbe

r of shares of

Common

stock outstanding

= 75,694

131,58

2

= 0.58

= 96,001

657,910

= 0.15

6.1 Ratio of the company for 2011 and 2012

6.2 Analysis of ratio

Ratio 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 company’s 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.

2011 20120.15

0.16

0.17

0.18

0.19

0.2

0.21

PERCENT(%)

PERCENT(%)

2011 20120

0.050.10.150.20.250.30.350.4

PERCENT (%)

PERCENT (%)

GRAPH 1: Comparison between 2011 GRAPH 2: Comparison between 2011

and 2012 Return on Asset ratio(ROA). and 2012 Return on Equity Ratio(ROE)

2011 20120.15

0.16

0.17

0.18

0.19

0.2

0.21

PERCENT(%)

PERCENT(%)

2011 20120

0.10.20.30.40.50.60.7

PERCENT(%)

PERCENT(%)

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 RATIO 2011 2012Current Ratio = Current

assets

= 349,754

137,947

= 380,266

120,393

Current Liabilities

= 2.54 = 3.16

Quick Ratio = Current

Asset – Inventory

Current Liabilities

= 349,754 –

170,955

137,9

47

= 1.30

= 380,266 –

192,285

120,3

93

= 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

company’s 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 RATIO 2011 2012Debt 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

= 105,057

1,573

= 66.79

= 130,649

2,328

= 56.12

interest charged 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

company’s 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. 

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

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

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 .

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 can t compete with mega firm and ’foreight brands on talents recruitment

Bargaining Power of Buyer –High

- Spending behaviour is

affected by their income

level

- Depends on economic condition against Income level

- Aware of consumer rights- Low swithching cost to

other similar brands.

PADINI’S PORTER FIVE FORCES