- It was announced on Bursa Malaysia yesterday that an
exclusive 10-year deal to distribute VNC women’s shoes and accessories in
Indonesia has finally been signed between Padini Holdings and Singapore’s FJ
Benjamin Group. The Vincci products, produced by Padini, will be sold under the
brand name of VNC in Indonesia.
- Under this deal, through FJ Benjamin’s associate, PT
Gilang Agung Persada, targets to open 25 stores within a period of five years
in Indonesia (with investments ranging from RM0.9mil to RM1.2mil per store).
Padini’s management expects five stores to be opened in the first year of
operations. The first store is expected to open in December this year. VNC will
run like a franchise, whereby FJ Benjamin is solely responsible for both
capital expenditure and marketing requirements.
- We are positive and excited about this partnership given
FJ Benjamin’s established presence for over 30 years in Indonesia and more
importantly, it has succeeded in building up many foreign brands there.
Furthermore, its associate PT Gilang Agung Persada has an intensive network of
stores in Indonesia, retailing foreign brands. This, we believe, enables Padini
to penetrate into the Indonesia market at a much faster pace.
- Backed by such a strong partnership and Padini’s strength
in product development, we opine the VNC’s brand name would be propelled to a
different level – underpinned by its immense knowledge of the local market,
strong experience in operating businesses in Indonesia as well as a track
record in managing global and regional brands.
- We would not be surprised should the VNC products receive
good or overwhelming response from the Indonesia market, fuelled by affordable
pricing and fashionable items. Notwithstanding this, Indonesian customers will
enjoy the same extensive range of VIncci products as their counterparts in Malaysia.
All new products will be launched simultaneously in both countries.
- Given that sales to FJ Benjamin is at a cost-plus basis,
the impact on Padini’s earnings is minimal in the near- to medium-term, unless
the distribution network grows considerably large in Indonesia. We see
potential in earnings contributions from this deal in the long term.
- We maintain our BUY rating on Padini with an upside bias
pending a discussion with management. Our DCF-based fair value of RM2.15/share
is currently under review. The FY12 result is expected to be released at
month-end. We continue to like Padini for its strong franchise value and
sustainable robust earnings growth.
Source: AmeSecurities
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