BWFN 3013 INVESTMENT ANALYSIS

SEMESTER II ACADEMIC SESSION 2022/2023 (A222)

GROUP B

INDIVIDUAL ASSIGNMENT :

COMPARE AND CONTRAST THE POTENTIAL OUTLOOK

BETWEEN PADINI HOLDINGS BERHAD & AMWAY
(MALAYSIA) HOLDINGS BERHAD

Lecturer’s Name
DR. ADILAH BINTI AZHARI

Prepared by
KIRTHANA A/P RAVINDERAN-289507

Submitted date
11TH MAY 2023
 TABLE OF CONTENT

1.0 Introduction………………………………………………………………. 1

1.1 Padini Holdings Berhad………………………………………………… 1

1.2 Amway (Malaysia) Holdings Berhad…………………………………… 1

2.0 Analysis of two Public Listed Companies……………………………….

2.1 Financial performance……………………………………………… 2

2.2 Stock performance…………………………………………………. 3

2.3 Growth opportunities………………………………………………. 4

2.4 Riskiness…………………………………………………………… 4

2.5 Price Momentum…………………………………………………… 5

2.6 Target Price…………………………………………………………. 5

3.0 Recommendation & Conclusion ………………………………………………. 6

3.1 Recommendation………………………………………………………….. 6

3.2 Conclusion…………………………………………………………………. 6

References………………………………………………………………………………. 7
1.0 Introduction
The Bursa Malaysia stock exchange, which is in responsible for the trading of stocks and
enforcing regulations to guarantee adequate market conditions, is where publicly traded
companies in Malaysia are quoted. A member of the ASEAN Exchanges is Bursa Malaysia.
The stock values of the thirty largest publicly traded firms in Malaysia are combined to
create the FTSE to improve trading and market appreciation in Malaysia. The Bursa
Malaysia Kuala Lumpur Composite Index, also known as FBM KLCI or KLCI, is a
capitalization-weighted index that is widely accepted as the reference index in Malaysia.
With this, there are two companies chosen from Bursa Malaysia to complete an analysis
regarding the stock performance report which is Padini Holdings Berhad and Amway
(Malaysia) Holdings Berhad to decide the best company that can be invested. Both of the
companies are categorized as consumer products and services and the sub-sector is retailers.

1.1 Padini Holdings Berhad

Investment holding firm Padini Holdings Berhad is headquartered in Malaysia. Under
a variety of names, including Miki, P&Co, Brands Outlet, Tizio, Vincci, Vincci
Accessories, Padini, Padini Authentics, PDI, and Seed, the company sells clothing,
shoes, and fashion accessories. Investment holding, apparel and footwear, and
management services are among the business's segments. The holding of investments
in subsidiary stock is the focus of the investment holding sector. The promotion and
marketing of stylish clothing, footwear, and accessories are the focus of the apparel and
footwear segment. Offering management services is what the management service
segment does. It runs franchise businesses, free-standing stores, and consignment
counters.

1.2 Amway (Malaysia) Holdings Berhad

Investment holding firm Amway (Malaysia) Holdings Berhad is based in Malaysia.
Amway (Malaysia) Sdn. Bhd. (AMSB) and Amway (B) Sdn. Bhd. are both held by the
Company, which also functions as its holding company. The Company principally uses
the Amway trademark in the direct sale of consumer goods. The company offers a
variety of products, from skincare, personal care, and durables to energy and health
supplements. About 450 consumer products are produced and distributed by the
company. There are roughly 20 outlets operated by the company countrywide.
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2.0 Analysis of two Public Listed Companies
Below are the aspects that are analysed in order to choose the best company that can be
invested.
2.1 Financial performance

Padini Holdings Berhad Amway (Malaysia)

Holdings Berhad

Fundamental score 10 7
Return on equity 25.7 % 32.7%
Current ratio 3.2 1.5
Gross Margin 33.8% 20.5%
Dividend coverage 4.2 2.4

Table 1: Fundamental indicators

Due to its solid fundamentals, which include high-profit margins, current ratio, and
dividend coverage, Padini has a fundamentally optimistic future with a fundamental
score of 10 compared to Amway (Malaysia) Holdings Berhad with a score of only
7 which is a neutral outlook where fundamentals relatively in line with the market.
Secondly, Padini has a lower return on equity which is 25.7% compared to Amway
with 32.7% where Amway is more profitable than Padini relative to the amount of
equity invested by shareholders. Thirdly, Padini has a higher current ratio which is
3.2 compared to Amway which is only 1.5. This demonstrates that Padini has higher
current assets than current liabilities, which indicates that the business will be better
able to satisfy its short-term obligations. Padini’s current ratio has been higher than
its industry group average while Amway’s current ratio has been lower than its
industry group average for each of the past five years. Next, Padini has a higher
gross margin which is 33.8% compared to Amway with 20.5% where Padini is able
to sell its products at a higher markup relative to its cost of goods sold. Lastly,
Padini has higher dividend coverage with 4.2 while Amway only 2.4 where Padini

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 has more earnings available to pay its dividends relative to its dividend payments
compared to Amway.

In a nutshell, overall, based on the fundamental indicators provided, Padini

Holdings Berhad appears to be the better company compared to Amway (Malaysia)
Holdings Berhad. Even though Padini’s return on equity is lower than Amway, it is
still substantially above the Specialty Retailers industry group average of 14.9%.

2.2 Stock performance

Padini has a higher rating of earnings which is 9 where it is a positive outlook that
has strong earnings compared to Amway which has only a 2 rating as it has a
negative outlook which has weak earnings.

In terms of earnings per share (EPS), Padini’s earnings per share in the year 2021
is 0.082 and increased to 0.230 which shows a 180.488% increase. On the other
hand, Amway’s earnings per share in the year 2021 is 0.224 and increased to 0.468
in the year 2022 which shows a 108.929% increase. This shows that Padini has a
higher percentage of increment from one year to another.

The market share price of a firm in relation to its earnings per share over the
previous year is examined by the trailing price-to-earnings ratio. A useful measure
for standardising and comparing relative share prices between different time periods
and companies is the trailing P/E ratio. Padini has the highest trailing P/E ratio with
17.0 while Amway is 11.5.

With this, it shows that Padini has better stock performance compared to Amway’s
stock performance.

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2.3 Growth opportunities

In terms of revenue growth, Padini’s revenue growth is 73.2% while Amway’s with
1.9%. This shows that Padini has a higher revenue growth rate, it typically indicates
that the company is generating more revenue over time, which is generally seen as a
positive sign for the company's financial health.

Based on the report, the annual revenue growth forecast for Padini for the year 2023 is
23.5% and for the year 2024, it is 37.0%. On the other hand, the growth forecast for
Amway for the year 2023 is -0.70%, and for the year 2024, it is 4.7%. This is clear that
Padini is expected to experience significant growth over the next two years, while
Amway's growth is expected to be more modest.

Besides, in terms of market capitalization, Padini has a larger market capitalization of

2.7 billion compared to Amway's market capitalization of 866 million. In investing,
companies with larger market capitalization are often safer investments as they
represent more established companies with a generally longer history in the business.
In a nutshell, Padini is a safer investment.

2.4 Riskiness

The correlation between Padini and FBM KLCI over the last 90 days is 6%, while
over the last 60 months, it is 29%. This suggests that Padini's stock price has shown
a relatively low correlation with the market index, indicating that Padini is less
influenced by the market and it is less risky. On the other hand, the correlation
between Amway and FBM KLCI over the last 90 days is 52%, while over the last
60 months, it is 41%. This suggests that Amway's stock price has shown a relatively
high correlation with the market index, indicating that Amway is more influenced
by the market and is more risky. This shows that Padini is less risky than Amway.

The investment in Padini shows to have performed better than the investment in
Amway over the past 90 days when comparing the daily returns of both companies.
Padini had a best daily return of 7.5% which is higher than Amway's best daily

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 return of 6.3%. Additionally, Padini's worst daily return of -5.3% is better than
Amway's worst daily return of -7.9%. In a nutshell, Padini is considered less risky
compared to Amway.

2.5 Price Momentum

Padini has a price momentum rating of 10, indicating that its price performance has
been very strong and is currently at its 3-year high. Additionally, its shares are
trading 2.6% above their 50-day moving average and 14.2% above their 200-day
moving average, suggesting that the stock is currently in an uptrend.

On the other hand, Amway has only a price momentum rating of 7, its shares are
trading only 1.0% above their 50-day moving average and 5.1% above their 200-
day moving average.

This indicates Amway has a less strong uptrend compared to Padini. In a nutshell,
Padini is considered a better investment option.

2.6 Target price

For Padini, the mean price target is MYR 4.87 with a high estimate of MYR 6.00
and a low estimate of MYR 3.63. This implies that, on average, the analysts expect
Padini's stock price to increase by 21.8% over the next 12 months from its current
price.

For Amway, the mean price target is MYR 5.96 with a high estimate of MYR 6.70
and a low estimate of MYR 5.20. This implies that, on average, the analysts expect
Amway's stock price to increase by 10.4% over the next 12 months from its current
price.

With this, it is clear that Padini has a higher price to increase over the next 12
months compared to Amway. This information helps the investors to choose the
best investment, in this case, Padini is the better one.

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3.0 Recommendation & Conclusion

As the analysis has been done based on the report, the best company that can be invested
have been chosen.

3.1 Recommendation

Based on the analysis above, Padini Holdings Sdn Bhd is known as the best company to be
invested in. Padini has the highest average score rating which is 10 while Amway is only
8. In terms of the company’s financial performance, even though Amway is considered to
have a higher return on equity, Padini has high-profit margins, current ratio, and dividend
coverage. Not only that to make my recommendation stronger, Padini also has a higher
percentage of EPS increment from one year to another. The higher increment percentage
of EPS gives confidence that the company has the capability to pay the shareholders high
dividends. Padini also has better growth opportunities in the future compared to Amway.
In addition, Padini is also less risky compared to Amway. In terms of price momentum,
Padini is considered the better investment option. Finally, Padini has a better strategic target
price. In a nutshell, based on the overall analysis made on different aspects, Padini is the
best company to be invested.

3.1 Conclusion

In conclusion, it is abundantly evident that there are numerous factors that must be
considered in order to select the ideal firm in which to invest. This is so that investors can
get a sense of how much cash the business has available to spend on new goods or services,
and so that investors can get a sense of how well the business is handling its finances.

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References

BursaMKTPLC: AMWA.KL. (n.d.).

https://www.bursamarketplace.com/mkt/themarket/stock/AMWA

BursaMKTPLC: PDNI.KL. (n.d.).

https://www.bursamarketplace.com/mkt/themarket/stock/PDNI

Home. (n.d.). https://www.bursamalaysia.com/