Wednesday, August 3, 2011

Padini/Bonia/Voir ... Aug11

Padini …

Padini is the largest and most profitable of Malaysia’s homegrown fashion companies. Between 2006 and 2010, its revenue rose from RM286.11 million to RM520.88 million while net profit surged from RM27.69 million to RM60.97 million, representing a 21.8% compound annual growth rate (CAGR).

With a market capitalisation of RM717.12 million, the stock trades at 10.58 times
(July 2011) earnings for its current year ending June 30 2011.

Bonia …

Bonia is Malaysia’s leading brand for leather handbags, with a growing line of shoes, menswear and other accessories. Over the past four years, the company’s revenue grew at a CAGR rate of 13% a year from RM221.37 million in 2006 to RM360.1 million in 2010, while net profit grew a robust 24.8% per year — from RM13.83 million to RM33.55 million.

With a market capitalisation of RM338.64 million, the stock is trading at eight times (July 2011) current year earnings.

Voir …

Voir, which focuses on ladies’ apparel, has seen fairly stagnant earnings despite rising revenues over the last four years. Between 2006 and 2010, net profit declined from RM8.12 million to RM7.7 million although revenue increased at an average of about 9% a year from RM117.15 million to RM165.19 million. Still, Voir has been profitable since its listing in 2007 and is the only fashion stock trading below its book value, which suggests no premium for its long-established brand names.

The stock is trading some 30% (July 2011) below book value and at a historical price-to-earnings ratio of eight times.

In contrast, the three fashion-related stocks in Hong Kong listed during May 2011 – June 2011 have rallied strongly, despite coming to the market at already lofty valuations.

Prada’s shares have rallied 19% since the company’s IPO raised US$2.46 billion (RM7.3 billion) in Hong Kong just over a month ago (June 2011). The stock now (July 2011) trades at a valuation of about 28 times 2011’s earnings. Milan Station has seen its stock surge 28% since its debut. Samsonite’s IPO was priced at 18.3 times projected 2011 earnings. With the stock now (July 2011) up 9% since then, it would be trading at close to 20 times.

Malaysian fashion players are also targeting overseas markets as the key to growing their revenues and their brand. And they are linking up with international players to widen their distribution network. 

In going overseas, Bonia is the most successful of the lot, with 25% of its revenues contributed by overseas sales. Padini’s sales abroad contribute 10% to its revenue while Voir’s stands at just 2%.

With large numbers of Middle East tourists in Malaysia, it is little wonder that the Middle East is a destination favoured for overseas expansion as they are familiar with Malaysian brands. Products of the Bonia and Padini, and to a smaller extent Voir, are already being sold in the Middle East. Voir announced an expansion to Ghana and Pakistan while Bonia is now trying to tackle arguably the most discerning market in the world — Italy and Europe.

To be sure, it is not all rosy in the fashion industry. All players have been subjected to rising raw material costs, in particular cotton, leather and labour. The price of cotton had surged three-fold between early 2010 and March 2011. They have since eased (July 2011) about 30% from their March 2011 peaks, but are still nearly twice their levels of a year ago (2010).

Most of Bonia’s mens shirts are made from 100% cotton. Its business development general manager Geoffroy de Drouas said although both the textile manufacturers and Bonia shouldered some of the burden, the prices of cotton-made apparel had to ultimately be increased.

Padini also had to take the same path, the company could not adjust the prices to cost increases too closely as it would cause too much of a fluctuation.

Voir’s long relationship between his company and the buying houses helped in negotiations to keep price changes in cotton to a minimal.

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