PADINI HOLDING BERHAD

1.0 COMPANY PROFILE

1.1 Background of the company
Padini

is

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%.

1.2 organizational charts

HAJI SAHID BIN MOHAMED YASIN
(CHAIRMAN)

YONG PANG CHAUN

(MANAGINGDIRECTOR)

YONG LAI WAH

(DIRECTOR)

CHONG CHIN LIN

(DIRECTOR)

FOO KEE FATT

(DIRECTOR)

CHAN KWAI HENG

(DIRECTOR)

YEAP TIEN CHING

(DIRECTOR)

CHEONG CHUNG YET

(DIRECTOR)

(Organisation chart been done by our group)

1.3 company structure

PADINI
HOLDING
BERHAD
Mikiho
Yee
use
Padini
Seed
Fong
10
Padini
10
10
10
10
0%
Childre
0%
0%
0%
Corpor
Corpor
Hung
0%
Dot
The
ns
ation
ation
(Malay
Com
Vincci
New
Wear
Sdn.Bh
Sdn.Bh
sia) Padini
Sdn.B
Ladies
Vincci
World
Sdn.Bh10
d 10
d 10 Sdn.Bh10
hd
Internat
0%
0%
Specialt
Holding
0%
0%
Garmend
d
ional
ies
s
t
Limited,
Centre
Sdn,bh
Manufa
Hong
Sdn.bh
d
cturer
Kong
d
Sdn.Bh
d

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.
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 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 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 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
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 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 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 noteworthy 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

Leading brand in Malaysia

S2

Many retail outlets

S3

Market leadership

S4

Promising quality

S5

Product for all ages

Unstable profits
No online shopping

External: Opportunities

External: Threats

T1

New to market

T2

Increase competition

T3

No celebrity endorsement

1
O

Expands their business

Prioritize local companies
Open more branches
Earn more profit

2
O
3
O
4

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 inhouse 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
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 TOWS
TOWS TABLE: PADINI HOLDINGS BERHAD
INTERNAL FACTORS
Strengths S
S1

Leading

Weaknesses W
brand

in W

Malaysia

EXTERNAL FACTORS
Opportunities O
O1 Expands their business
O2 Prioritize local companies
O3 Open more branches
O4 Earn more profit
Threats T
T1 New to market
T2 Increase competition
T3 No celebrity endorsement

S2

Many retail outlets

S3

Market leadership

S4

Promising quality

1
W

Unstable profits
No online shopping

S5 Product for all ages

SO Strategy
WO Strategy
(s3 + o1)
(w2 + o3)
Using the power as market Placing more branches to
leadership to expand their
business (horizontal)
ST Strategy
(s1 + t3)

cover loss of potential online

customer (market dev)
WT Strategy
(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

5.1.2

power to control over

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
5.1.3

customer on self-satisfaction.
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

5.1.4

consider offering an endorsement to the icon celebrity.

WT Strategy:

6.0 RATIO ANALYSIS

PROFITIBILITY RATIO
Return on Total Assets (ROA) = Net Income

2011
= 75,694

2012
= 96,001

Total Asset

444,339

482,305

Return on Equity (ROE) =

Net Income

= 0.17
= 75,694

Total Stockholders Equity

Return on Investment (ROI) =
Net profit
After tax and interest
Total Assets
Earning Per Share =

Net Income

340,109
= 0.22
= 75,694
444,339
= 0.17
= 75,694

Number of shares of
Common stock outstanding
6.1 Ratio of the company for 2011 and 2012

131,582
=

0.58

= 0.20
= 96,001
282,677
= 0.34
= 96,001
482,305
= 0.20
= 96,001
657,910
= 0.15

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 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-toearnings 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.

PERCENT(%)
0.21
0.2
0.2
0.19
0.19
0.18
0.18
0.17
0.17
0.16
0.16

PERCENT(%)

2011

2012

PERCENT (%)
0.4
0.35
0.3
0.25

PERCENT (%)

0.2
0.15
0.1
0.05
0
2011

2012

GRAPH 1: Comparison between 2011

GRAPH 2: Comparison between 2011

and 2012 Return on Asset ratio(ROA).

and 2012 Return on Equity Ratio(ROE)

PERCENT(%)
0.21
0.2
0.19

PERCENT(%)

0.18
0.17
0.16
0.15
2011

2012

PERCENT(%)
0.7
0.6
0.5
PERCENT(%)

0.4
0.3
0.2
0.1
0
2011

2012

GRAPH 3: Comparison between 2011

and 2012 Return on Investment Ratio(ROI).

LIQUIDITY RATIO
Current Ratio =
Current assets
Current Liabilities

GRAPH 4: Comparison between 2011

and 2012 Earning Per Share Ratio(EPS).

2011
= 349,754
137,947

2012
= 380,266
120,393

Quick Ratio =

Current Asset Inventory

= 2.54
= 349,754 170,955

= 3.16
= 380,266 192,285

Current Liabilities

137,947

120,393

= 1.30

= 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 RATIO
Debt to
=
Total debt
total asset

Total Asset

2011
= 161,662

2012
= 142,196

444,339

482,305

ratio
Debt to

Equity ratio

Total stockholders equity

LTD to
Equity ratio

Total debt

= Long Term Debt

= 0.29

= 161,662

= 142,196

340,109

282,677

= 0.48
= 23,715

= 0.50
= 21,803

Total stockholders equity

Times interest
Earned ratio

= 0.36

340,109
= 0.07
= 105,057

= EBIT
Total interest charged

1,573
=

Inventory turnover

Sales

Inventory
Fixed Asset Turnover

Sales
Fixed Asset

Total Asset Turnover

Sales

Total Asset

66.79

282,677
= 0.08
= 130,649
2,328
= 56.12

= 568,476

= 723,411

170,955

192,285

= 3.33
= 568,476

= 3.76
= 723,411

94,585

102,039

= 6.01

= 5.57

= 568,476

= 723,411

444,339

482,305

= 1.28

= 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.

PADINIS PORTER FIVE FORCES

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.

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

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

Threat of Substitute Low

-

Apparel industry is a saturated and

& shoes while outsource its

matured market where it is basic

manufacturing services to 10 OEM

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.

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.