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.