3.

PADINI HOLDINGS BERHAD

1.0 COMPANY PROFILE
1.1 Background Padini Holdings Berhad (Padini) was incorporated in 1971. Before venturing into trading, distribution and retailing Padini started its business in manufacturing & wholesaling. Padini is the largest domestic apparel retailer. Padini is one of Malaysias most profitable retail companies with 7 main brands, catering to virtually all segments of the Malaysian market, making it a resilient proxy to the retail industry. Mr Yong Pang Chaun, whom is the current managing director and also a substantial shareholder with a 44.0% stake, is also the founder of the group. The group has developed their retail business for the low to middle income level over the years. Started life as a manufacturer and supplier of garments around the early 70s, the group then made inroads into the retail scene some years later with its diversified flagship brand. Padini has over 41 years under its belt and is still going strong until now. 1.2 Board of Directors Chairman Datuk Dr. Abdullah Bin Abdul Rahman Independent Non-Executive Director

Director Yong Pang Chaun Group Managing Director Director Cheong Chung Yet Executive Director Director Yong Lai Wah Executive Director

Director Chan Kwai Heng Executive Director Director Chong Chin Lin Executive Director Director Sahid bin Mohamed Yasin Independent Non Executive Director

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1.3 Organisation Chart

The founding Yong Family 44%

PADINI HOLDINGS BHD

Padini Corporation Sdn Bhd

Padini International Ltd (HK)

Vincci Ladies Specialties Centre Sdn Bhd

Yee Fung Hong Sdn Bhd

The New World Garment Manufacturers Sdn Bhd

Padini Dot Com Sdn Bhd

Vincci Holdings Sdn Bhd

Mikihouse Children Wear Sdn Bhd

SEED Corporation Sdn Bhd

1.4 Core business Padini Holdings Bhd sells apparel and accessories with overwhelming domestic presence as well as exposure in high end, mid-end and value clothing segments for all age group 1.5 Mission To exceed customers expectations and our brands promise. 1.6 Vision To be the best fashion company ever. 1.7 Authorized Capital The authorized capital of Padini is RM100, 000, 000. 1.8 Pay up Capital The pay up capital of Padini is RM65, 791, 000

2.0 GENERAL ENVIRONMENT

2.1 Politics a. Economic Transformation Programme (ETP). 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
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the group offers. The incremental of wealthy and thriving consumer base has allowed brands such as Padini, Padini Authentics 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. b. Third Industrial Master Plan (IMP3). This plan covers growth areas include industrial and home textiles; functional fabrics; high- end fabrics and garments; ethnic fabrics; and key support facilities and services such as design houses and fashion centres, specialized dyeing and finishing facilities, etc. Six strategic drives have been implemented to expand the industry further include: i. Magnifying the promotion of investment in higher value added textiles and apparel as well as key support services. ii. Maintaining the market share in textiles and apparel and promoting exports of the growth goals. iii. iv. Magnifying regional cooperation in the industry. Amplifying national capabilities and aiding the ICT application and new technologies. v. Amplifying the workforce abilities in developing production and marketing. vi. Enhancing the institutional support for the further development of the industry. c. Investment Act 1986 Under the Investment Act 1986, various textile products and activities have been gazetted as promoted products and activities to enhance investments in the textiles and textile products industry. These products and activities could be accounted for tax incentives in the form of Pioneer Status or Investment Tax Allowance. The products and activities are: i. ii. iii. iv. v. vi. Natural or man- made fibres Yarn of natural or man- made fibres Woven fabrics Knitted fabrics Finishing of fabrics such as bleaching, dyeing and printing Non- woven fabrics
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vii. viii.

Specialized apparel Technical or functional textiles and textile products

d. National Key Economic Areas (NKEA) For the past 10 years, Malaysia has organized various nationwide sales which formed yearly sales known as Mega Sale Carnival, GP Sales and Year - End Sales. The domestic retail sector has benefited from these activities. These activities have widen and augmented all economic sectors through a unified sale happening nationwide. The outcome is the creation of the 1Malaysia Unified Sales aimed to attract tourists and locals to shop in Malaysia. On 15th June 2011, the Honourable Minister of Domestic Trade, Cooperatives and Consumerism and the Tourism Minister had jointly established 1Malaysia Unified Sale in Suria KLCC. The sale was done together with the 1Malaysia Mega Sale Carnival from 15th June 2011 until 4th September 2011 2.2 Economy a. Inflation Inflation indicates the economic fluctuations in Malaysia according to the changes in the Consumer Price Index (CPI) of a country. CPI shows the divergence in prices of consumer goods in the countrys shopping basket over a duration.

Figure 1: Malaysian CPI and Inflation Rate : January 2011- January 2012

.
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Based on Figure 1, the Malaysian inflation rate was recorded between 2.2 percent and 3.5 percent for year 2011. This shows healthy level of inflation in Malaysia as most economists believe that healthy inflation rate is between 1.0 percent and 3.0 percent. The risk of financial markets is reduced with low inflation rates and this ensures flavourable business environment. b. Gross Domestic Product The prime indicator of the wealth of Malaysian economy is measured using Gross Domestic Product (GDP). A precise GDP figure is calculated by considering and adjusting the Private and Public sector spending, the production of goods and services and exports in the country for imports and inflation.

Figure 2: Malaysian GDP Value ($ Billions): 2003- 2012 Based on World Banks report, the Malaysian Gross Domestic Product (GDP) had obtained 278.67 billion US dollars in December 2011. The Malaysian GDP is estimated to be 0.45 percent of the world economy. From 1960 to 2011, the average of Malaysian GDP was 59.93 Billion USD. In that duration, the highest GDP recorded was 278.67 Billion USD in December 2011 and the lowest was 2.42 Billion USD in December 1961.

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Figure 3: Malaysian GDP Growth Rate The Gross Domestic Product (GDP) growth rate measures an aggregated difference in value of the goods and services manufactured by an economy. In Asia, Malaysia is a fast developing economy. Since the 1970s, as an average income country, Malaysia has changed from a manufacturer of raw materials into a rising multi- sector economy. To detach from the countrys reliance on exports, the Malaysian government has worked on raising domestic demand. However, exports especially electronics continue to drive the economy significantly. From the beginning of April to the end of June 2012, the Malaysian Gross Domestic Product (GDP) increased 3.00 percent compared to the previous quarter. During 2000 until 2012, the average of the Malaysian GDP Growth Rate was 1.22 percent. In that duration, the highest rate was 5.90 percent in September 2009 and the lowest rate was -7.60 percent in March 2009.

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Malaysian GDP Composition by Sectors in 2011

Agriculture 12% Services 48% Industry 40%

Figure 4: Malaysian GDP Composition by Sectors in 2011 Source:https://www.cia.gov/library/publications/the-worldfactbook/fields/2012.html, The Central Intelligence Agency. Figure 4 shows the major movements in Malaysian economy are Industry and Service sectors. In service sector, critical forces were finance, real estate and information and telecommunications services. Besides that, rapid growth in wholesale and retail service sector is seen in recent years. c. Unemployment Rate The unemployment rate represents the percentage of active job seekers that is jobless, out of the total number of labour force. Roughly 4% -6% in the unemployment rate is considered healthy. Lower rates are caused by inflation and upward pressure on wages while higher rates reduce the consumer spending.

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Figure 5: Malaysian Unemployment Rate : October 2010- September 2012 From October 2010 until September 2012, the unemployment rate in Malaysia is too low around 2.8% to 3.4%. Hence, this inflationary situation has forced employers to continually increase wages on retaining and attracting valuable employees. Since firms have to widen resources on retaining and attracting employees, they would put less effort in performing their duties. As a result, the unutilized of resources would result in less innovation and slower productivity growth. 2.3 Socio- cultural a. Demographic Elements

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 Population Major cities- population Ethnic groups Languages Religions

Yearly growth 1.542% (2011 est.) Infant deaths in 1,000 births are 14.57 Persons below aged 15 is 29.6% Urban population is 72% of the population (2010) Urban population growth is 2.4% (2010) Literacy rate is 88.7% Kuala Lumpur (capital) 1.493 million Klang 1.071 million Johor Bahru 958,000 (2009) Malay 50.4% Chinese 23.7% Indigenous 11% Indian 7.1% Others 7.8% (2004 est.) Bahasa Malaysia, English, Chinese dialects, Tamil, Telugu, Malayalam, Panjabi, Thai Note: indigenous languages in East Malaysia Muslim 60.4% Buddhist 19.2% Christian 9.1% Hindu 6.3% Confucians and Taoist 2.6% Others 1.5% None 0.8% (2000 census)

Table 1: Malaysias Demographic Elements Source:http://www.indexmundi.com/malaysia/demographics_profile.html,CIA World Factbook)

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As 60.4% of the population is Muslim in Malaysia, the political, judicial and religious systems are closely associated and religious leaders take eminent positions in the country. b. Structure of Household Expenditure Household Consumption by Purpose 2000 Food and non-alcoholic beverages Alcoholic, beverages and tobacco Clothing and footwear Housing, water, electricity, gas and fuels Furnishings, household equipment and maintenance Health Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous goods and services 2.1 12.6 4.9 4.3 1.5 5.8 11.6 2.1 13.1 7.4 4.9 1.6 9.7 12.7 2.0 13.4 6.3 4.5 1.5 7.5 12.8 5.9 5.2 5.4 2009 2000-09 % of total household consumption 23.0 24.1 21.8 2.2 3.5 21.7 2.3 2.4 16.7 2.1 2.7 18.9

Table 1: Malaysian Household Consumption by Purpose: 2000- 2009 Source:http://www.bnm.gov.my/files/publication/ar/en/2010/cp01_001_w hitebox.pdf, Department of Statistic, Malaysia) Table 1 shows that the expenditure for clothing and footwear is small, making up of 2.7% of the total expenditure. According to the Q411 Nielsen Global Confidence Survey, 58% of 500 Malaysian respondents reduce clothing expenditure. However, the Malaysias index scored 101 which indicates optimism. 2.4 Environmental Elements

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Business environment should be conserved by any company as consumers might not purchase harmful product or product that uses harmful processes. a. Background of Malaysian Environment Malaysia makes up of 328,550 square kilometers of land and has 20 million population ( July 1997 est.). Most of the citizens occupy the western coast. 59% of the total land is tropical forest. Even after industrialization, a large area of the country is still forested. Malaysia has the highest industrial carbon dioxide emissions among 50 nations in the world. The negligence would cause major environmental problems. b. Causes and Adverse Effects of Bad Environment Industrialization and progress of natural resource basis have created environmental problems. The adverse effects are deforestation, depletion of fisheries, air and water pollution and contamination by industrial wastes. c. Environment Laws The main structure of environment legislation in Malaysia was the 1974 Environmental Quality Act (EQA). Since then, the regulations are constituted. Based on EQA 1996, it has been amended many times. Other legislations are the Fisheries Act 1985, the Pesticides Act 1974 and the Plant Quarantine Act 1976. d. Types of Legislation The procedure of legislation in Malaysia is as follows: 1. The Federal Constitution (Perlembagaan Persekutuan). 2. Parliament constituted the Acts. 3. The executive (Ministerial Regulations) enacted rules and other subordinate legislation. 4. State laws and rules. e. Results of the Acts In 1978, industrial and automobile emissions are restricted by clean-air legislation. In Malaysian seas, vessels are not allowed to emit oil. 2.5 Technological Analysis

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Technological advancement helps to improve performance of the companies in competing for differentiation and providing superior product to its customers. The Ministry of Science, Technology and Innovation (MOSTI) is responsible for the research, telecommunication and information technology of Malaysia. The objective of the ministry is to induce competitiveness in science and technology using the creation of knowledge and sustainable development. Table 2: MOSTIs agencies Agencies Malaysian Centre For Remote Sensing (MACRES). National Science Centre. National Oceanography Directorate. National Space Agency. Department of Chemistry Malaysia Malaysian Nuclear Agency. Malaysian Meteorological Services. Department of Standards Malaysia Atomic Energy Licencing Board. Role Remote sensing, telemetry, geographic information system (GIS) and research. Promoting awareness, appreciation, interest understanding of science and technology. Marine science and oceanography development. and

Research and development of space science. Chemical analysis, investigation/ forensic consultancy services/ Nuclear technology research and development. and

National meteorological monitoring services and natural disaster warning. National standards and Accreditation body. Control and supervision of radioactive material usage in industries. The board also examines and enforces safety rules.

MOSTI also gives research grants. Through specialized schemes, the funds are available such as ScienceFund, Techno Fund (Pre- commercialization and IP acquisition fund), InnoFund (Enterprise innovation and community innovation fund), eHCD (Human capital development fund), eIRPA and the Brain Gain fund.

3.0 TASK ENVIRONMENT ANALSIS

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According to Michael Porter, there are five forces which determine the competition in the industry as listed in table 1. They are competitive rivalry, threat of substitute, threat of entry, buyer power and supplier power. The explanation below will describe that how a dairy industry as being influenced by five forces.

High Competitive Rivalry Threat of New Entrants Threat of Substitutes Supplier Power Buyer Power

Medium

Low

3.1 Competitive Rivalry When the number of competitors increases, the rivalry increases because of more firms must compete for the same customers and resources. If the competitors have similar market share, the rivalry will become intensified. When the firms are of equal size, they will have to compete for the same resources such as market share, customers' loyalty, brand image and other factor. In the current market, PADINI face many competitors from local and also oversee brand such as Levis, ZARA or GUESS. They also face with foreign competitor such as Giordano, Levis jeans and others. Besides that, most of the customer will compare the price with the other competitors. They also compare the styles of the clothing season. This make the Padini need to compete with Esprit, Giodano and others. They have to make sure that they make a sale and customers will always keep returning to their shop.

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In conclusion, the intensity of rivalry among existing competitors of Padini is high because the number of competitors in the retail industry and the established brands. Competition is very fierce and a certain percentage of loyal customers need to be maintained in order to remain in the competitive industry. 3.2 Threat of New Entrants The existing companies such as Esprit, Bonia and Elba have already established themselves with manufacturing. They are already operating at the lowest cost possible because their selling prices are much cheaper than foreign competitors. Thus, it is difficult for new comers to come into the market, because they will face retaliation from the existing companies. New companies can come into the market; however they cannot operate in a large scale immediately. Companies that have already existed in the market for long such as Esprit, Elba, and Bonia have established themselves with their suppliers, the distribution agents and the customers. They have already obtained the learning experience of studying the market and knowing what exactly the customers are looking for. Thus, this would pose a threat for the new entrant, because when selling clothing, it may not be according to the taste of the Malaysian consumers, they will have to undergo a test and trial stage, and this would be costly if they are competing with the large retailers. The threat of entry for Padini is low, because Padini is a large retailer. They have a huge amount of outlets and they understand what the customer wants. So they will producing a product cheaply and sell it in the lower prices 3.3 Threat of substitute The threat of new entrants to the apparel industry market leaders in the clothing and apparel industry are relatively low. This is mainly due to the fact that the big players superior financial resources greatly overpower the new entrants. The company has appeared in the market for about 20 to 30 years, most of the customers know it very much. This makes them have brand loyalty among customers. So there are difficult for the new entrants. Furthermore, apparel is no visible substitute, because clothing is a basic need and necessity. However, there are potential substitutes in reaching to the customers. This is in the
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form of a non-retailing store such as direct mail, online shopping, direct mailers, telephone sales, door-to-door selling. In Malaysia, we have already seen this appearing such as SmartShop, Cosway, Amway, and others. The threat of new entrants to the apparel industry market leaders in the clothing and apparel industry are relatively low. 3.4 Buyer power In the clothing and apparel industry, the bargaining power of buyers is relatively large because the cost of switching companies is non-existent and as simple as walking from one store to another. If APP or a competitor raises prices, customers will go find a more affordable option. In addition, consumers do not see high-end clothing products as an essential commodity so, its price elastic. Padinishares the same customers such as Esprit, Levis, Lee Cooper, and Bonia. Thus, switching cost is low and if customers are not satisfied with the quality, and service offered, they will switch to other products and purchase from them. From here, the fashion is the important things to the Padini. Customers will see how fashionable of Padini provide and the price of a clothes. So, the bargaining power of buyers here is moderate, and they can influence fashion, and the products carried by Padini. 3.5 Supplier power For the clothing and apparel industry in general, the power of suppliers is low merely because there are many different suppliers who are readily available to offer up their services. If a supplier raised its costs, a firm could move on elsewhere. The number of raw materials available is numerous, especially from foreign countries which would definitely be cheaper. Padini manufacture their own clothing so the power of suppliers will arise in the purchase of raw materials. In the Padini, the bargaining power of suppliers is weak because if the suppliers raise the prices or reduce the quality, then there are other suppliers available especially from the third world countries such as China, Vietnam and India. Furthermore, the switching cost of the supplier is low, because the basic materials needed to manufacture clothing is the same, such as thread, material, and other necessities.

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4.0 SWOT ANALYSIS

Strength(S) 1. 2. 3. 4. Strong brand presence. Diversified segmentation. Exposure in major retail centres. Strong brand image and brand reputation. 5. Cash pile available for distribution or store expansion. Weaknesses(W) 1. Presently lacks international presence in most major markets outside Asia and Arabian countries. 2. Shortage of retail labour. 3. Poor advertising strategic. 4. Face difficultly in forecasting fashion trend.

Opportunities(O)
1. Increasing income level in Malaysia. 2. Mega carnival sales implemented by government. 3. Great inflow of tourist from foreign country. 4. ETP projects to further fuel growth of retail and tourism sector. 5. Implementation campaign on buy Malaysian products.

Threats (S)
1. Seasonally driven by sales promotions and festivities. 2. Changes in cotton prices and increase minimum wage in China. 3. Potentially aggressive competition from new brand labels penetrating the domestic market. 4. Exposed to raw materials prices and material. 5. Insufficient R&D development.

1) Strengths Padini has a strong brand presence in domestic market and exposure in major retail centre. Padini has a total of 80 freestanding stores and 140 consignment counters scattered around Malaysia. It has outlet in most major shopping centres nationwide, including Gurney Plaza Penang, 1 Utama shopping complex, and AEON Bukit Tinggi shopping centre. There are variety Padini product to be choose in the market which diversified segments represented in different brand cater to almost all ages as well as income group. Padini has a clean balance sheet which is with a net cash position where RM135 million cash pile available for distribution or store expansions.

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2) Weaknesses Although Padini is well-known in domestic market and certain foreign market, it is still presently lacks international presence in most major markets outside Asia and Arabian countries. There is inherent risk in forecasting the right trends. In accurate forecasts would result in poorer sales from unattractive fashions, as well as more inventory writedowns. Padinis pace of store expansion is contingent upon ability to procure front -end retail staff. Padini were once upon a time popular, however this popularity cannot be the same if no advertising is done. There is no advertising during periods of sales or launching of new products.

3) Opportunities Economic Transformation Programme(ETP) boost the growth of retail and tourism sector. Padini should able to capitalize on Malaysias growing affluence as people are able to afford higher priced items, on top of the value products the group offers. Malaysia government had implemented the Mega carnival sales which are held 3 times a year. This is to increase the sale and consumer spending because after the 97crisis, consumers had been reluctant to spend. Besides that, there is a great inflow of tourist from Singapore and other foreign countries, especially during period of sales. The government has implemented a campaign on buy Malaysian product. This is to increase sales of the domestic market and to help them survive the stiff competition. Increasing income level within Malaysian makes them more affordable to buy extra stuffing accessories.

4) Threats Padinis sales generally fluctuate with seasonal festivities and other nationwide sales programmes. However, during quiter periods with no festivities (typically every Apr-Jun), the group sees comparatively lower sales figure. Padinis materials are in the form of finished goods, but increased in cotton prices, are appreciation of the Chinese RMB, and minimum wage hikes in china would translate into higher garment prices. The China Daily reported that the countrys minimum wage will rise by an average rate of 13% over
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the next five years. Malaysia has seen a number of foreign brands (Uniqlo, Charles and Keith, Cotton-On) enter the country trying to tap on increasing domestic affluence, and that has resulted in mounting competition in the retail industry. Insufficient of R&D department cause the company unable to monitor the fashion of clothing in Malaysia and in other leading country.

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5.0 TOWS MATRIX

INTERNAL FACTORS (IFAS)

EXTERNAL FACTORS (EFAS) )

Strengths (S) 1. Strong brand presence. 2. Diversified segmentation 3. Exposure in major retail centres. 4. Strong brand image and brand reputation. 5. Cash pile available for distribution or store expansion.

Weaknesses (W) 1. Presently lacks international presence in most major markets outside Asia and Arabian countries. 2. Shortage of retail labor. 3. Poor advertising strategic. 4. Face difficultly in forecasting fashion trend.

Opportunities (O) 1. Increasing income level in Malaysia. 2. Mega carnival sales implemented by government. 3. Great inflow of tourist from foreign country. 4. ETP projects to further fuel growth of retail and tourism sector. 5. Implementation campaign on Buy Malaysian Products. Threats (T) 1. Seasonally driven by sales promotion and festivities. 2. Changes in cotton prices and increase minimum wage in China. 3. Potentially aggressive competition from new brand labels penetrating the domestic market. 4. Exposed to raw materials prices and material. 5. Insufficient R&D development.

SO Strategies WO Strategies 1. Build on brand 1. Increasing awareness of loyalty. customers about sales (S1,S3,O3) through media. (W3O2) 2. Increase the store 2. Improve distribution outlet. (S5O1) channel through agency 3. Provide variety of service. (W1O4) products. (S2O5)

ST Strategies WT Strategies 1. Gains competitive 1. Doing marketing advantage among research. (W4T5) competitors. 2. Aggressive advertising. (S1S2S4T3) (W3T3) 2. Increase social responsibility by doing charity. (S4T1) 3. Manage the profit effectively. (S5T5)

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i.

Strengths and Opportunities Strategies

Padini has the strengths of strong brand presence, strong brand image and brand reputation among the consumers. In addition, they also has the great inflow of tourist from foreign country such as Singapore, Indonesia, and Arabian countries. This can be a good strategies for them to build brand loyalty on consumers form local and foreign countries. Padini has good position on their financial which there are cash pile available for them to distribution or store expansion. So, to fulfill the opportunities that currently consumers have increased income level, Padini can increase the store outlet in the market so consumers can easily shop for the products. One of the strengths of Padini is their product was market in diversified segmentation which is from children to adult. In addition, government also provide the opportunities for the industry with implement campaign on Buy Malaysian Products. Padini should take this chances to produce more variety products for the consumers to choose. ii. Weaknesses and Opportunities Strategies

Padini has the weakness in advertise their product. There are less effective advertising implement by the marketing department. In order to bear with this weakness, they need to implement a strategy by increase awareness of customers about their product through media. One of the way is participate in Mega Carnival sales that implement by government. Although Padini is a wellknown in Asia and Arabian countries, it still facing the weakness of lacks international presence in most major markets outside those countries. So, they can take the opportunities from ETP projects to further fuel growth of retail and tourism sector by implement the strategy of getting service from agency centre in foreign countries. iii. Strengths and Threats Strategies

Padini always face greater competitive in the industry. There is always a lot potential aggressive competitor from new brand labels penetrating the domestic market. However, Padini have the strengths of strong brand presence, strong brand image and brand reputation among the consumer, and also they have variable consumers in diversified segmentation. So, this can be the

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strategy for the company to gain competitive advantage among competitors. Another threats of Padini is they have to face the problem of seasonal driven by sales promotion and festivities. Consumers only will buy the products in certain period. So, inventory turnover for certain period will be low. The strategy for settle this is by increase social responsibility by doing charity such as donates some products for association they need it since they has the strengths of strong brand image and brand reputation. Padini face another threats of insufficient R&D development in the industry. With the strengths of cash pile available, they can implement the strategy by manage the profit effectively so the R&D department can be develop to gain more latest technology and information. iv. Weaknesses and Threats Strategies

To solve the weakness of facing difficulty in forecasting fashion trend and also the threat of insufficient R&D development, Padini can implement the strategy gain and do marketing research by expert. They can build a marketing research department so that the problems can be solving effectively. Other than that, poor advertising and aggressive a competition from new brand labels penetrating the domestic market might give them the risk that consumers will choose for substitute products. in order to bear with the risk, Padini need to implement a strategy of aggressively advertise their product in market such as expose more on media by organize and sponsor activities.

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6.0 FINANCIAL RATIO

PADINI HOLDINGS BERHAD Ratio 2011 PROFITABILITY RATIO Net profit margin Gross Profit Margin Return on investment Return on equity Earning per shares LIQUIDITY Current ratio Quick ratio Inventory to net working ACTIVITY RATIO Inventory turnover Days' sales in inventory Total assets turnover Fixed assets turnover Average collection period LEVERAGE RATIOS Debt to equity ratio Long term debt to capital structure 13.32 51.16 17.04 115.05 0.12 2.54 1.30 0.81 FY 31 Dec 2010 Variances 11.75 49.98 17.10 92.68 0.46 2.37 1.69 0.50 Increase Increase Decrease Increase Decrease Increase Decrease Increase Decrease Increase Decrease Decrease Increase Increase Increase

0.63 0.64 116.15 55.72 1.28 1.46 1.86 2.09 25.32 22.91 0.72 0.21 0.46 0.01

The table above is the ratio analysis of PadiniBerhad in two years performance from year 2010 to 2011. A. PROFITABILITY RATIO It relates the profit to sales and investments. Profitability ratio is to indicate the firms overall effectiveness of operations and give us an idea on how well the firm utilized its resources in order to generate profit and increase the shareholder value. a. Net Profit Margin

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This ratio is to indicate how much of revenues a company can generate for every RM 1 in sales. In Padini, the net profit margin has significant increase from 11.75% in year 2010 to 13.32% in year 2011. The arising percentage of 1.57% shows thatPadini has well performed in year 2011 compare with the performance in year 2010 where thePadini has more generates RM 0.0156 of every RM 1 in sales. b. Gross Profit Margin Gross profit margin is to show how much the gross profit of every RM 1 in cost of goods sold. In Padini, the gross profit margin has increase from 49.98% in year 2010 to 51.16% in year 2011. The arising percentage of 1.818% shows that the management ofPadini has a well control system in its expenses in order to generate more profit to its company. c. Return on Investments (ROI) This ratio shows how well the firm management puts the company assets to work in order to generate income. Lower ratio shows lower company performance.ROI ratio in Padini shows decline of 0.06% which decrease from 17.10% to 17.04% in these two years. It shows that the Padini has reduced in using assets to generate the firm sales. d. Return on Equity (ROE) This ratio is to measure how the stockholders fared during the year. It is a true bottom-line measure of performance. ROE ratio has increase 22.37%, from 92.68% in 2010 to 115.05% in 2011. That is Padinis superior return on equity maybe due to its efficient use of asset to generate sales and the fact that Padini benefitted from its use of more debt financing or financial leverage. e. Earnings per Share Earnings per share represent the portion of a company's earnings, net of taxes and preferred stock dividends, which are allocated to each share of common stock. EPS ratio has slightly decrease RM0.34, from RM0.46 in 2010 to RM0.12 in 2011. This means that it is not a good signal for the company financial position because the lowerer the earnings per share, the lower each share worth. B. LIQUIDTY
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a. Current Ratio It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. This ratio increase 0.17 times, from 2.37 times in 2010 to 2.54 times in 2011. Even the current ratio is increase a bit; the current assets of the firm are still more than twice the current liabilities. It shows that the company is generally considered to have good short term financial strength. b. Quick Ratio Quick ratio is a measure of how well a company can meet its short term financial liabilities. The ratio decrease 0.30 times, from 1.69 times in2010 to 1.30 times in 2011. The lower the ratio the less financially secure a company is in the short term. The company with a quick ratio of lower than 1.0 is not sufficiently able to meet their short term liabilities. C. ACTIVITY RATIO

a. Inventory Turnover Inventory turnover ratio indicates the number of time the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory.The ration decrease 0.01times, from 0.64 times in 2010 to 0.63 times in 2011. This shows that the demand of the Padinis product is decrease or not enough. It is also mean thats the products are sitting in the warehouse unsold for too long, which is costly for business. b. Total Assets Turnover The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales. The ratio decrease 0.18 times, from 1.46 times in 2010 to 1.28 times in year 2011. The ratio is merely decreased shows that there are little sluggish in the firms sales. c. Fixed Assets Turnover The fixed asset turnover ratio measures the company's effectiveness in generating sales from its investments in plant, property, and equipment. The ratio has been decrease 0.28 times, from 2.09
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times in 2010 to 1.86 times in 2011. An decreasing fixed assets turnover means that the company has been less effective using companys investments in net property, plant, and equipment. d. Average Collection Period The average collection period is the number of days, on average, that it takes a company to collect its credit accounts or its accounts receivables. The ratios significantly increase 2.41 days, from 22.91 days in 2010 to 25.32 days in 2011. By comparing with last year, a increasing of average collection period means Padinis customers are not paying their credit accounts on time. D. LEVERAGE RATIOS

a. Debt Equity Ratio Debt equity ratio is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed.The ratio increase 0.26 times, from 0.46 times in 2010 to 0.72 times in 2011. The increasing in this ratio might show that the company is being financed by creditors rather than from its own financial sources which may be a dangerous trend. The company with high debt-to-equity ratio may not be able to attract additional lending capital. b. Long Term Debt to Capital Structure It is used in determine what portion of the total capitalization, or full debt and equity of the company, is made for the long term debt to finance operation. The ratio for long term debt capital structure shows increasing 0.2 times, from 0.01 times in year 2010 to 0.21 times in year 2011. Increasing of this ratio means that the company is facing mature financial difficulty.

7.0 STRATEGY DIRECTION

PADINI began as a back end operations in Malaysias apparel industry, manufacturing, trading and supplying garments to order for retailers and distributors. Today, Padini has become one of the most well-known brands in Malaysia's multibillion garment industries. A brand leader in the distribution and retailing of its own fashion labels through more than 230 freestanding stores, franchises and consignment counters. Padini has also proudly carried the Made-in-

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Malaysia stamp abroad, with its products exports to Thailand, Brunei, Saudi Arabia, Philippines, Cambodia, India, Egypt, Oman, UAE, Indonesia and Syria Padini also has a small export business that contributed 9% of FY10 group revenue. The groups export sales consist primarily of womens footwear to the M iddle East, Thailand, Singapore, Philippines, Indonesia, Brunei and Australia. Padinis export business was unsolicited and originated from foreign parties approaching Management upon discovering Vinccis products. The groups export business is organised along the franchise model which minimizes Padinis risk exposure as the cost of setting up stores and operating expense are borne by the franchisees. Padini earns a one-off licensing fee and royalties in addition to merchandise sales to franchisees. Padini Holdings Bhd's line of women's shoes and accessories under its Vincci label would be distributed in Indonesia under a 10-year deal. Its unit Vincci Ladies' Specialties Centre Sdn Bhd had on August 7, 2012 signed a master franchise agreement with FJ Benjamin (Singapore) Pte Ltd and PT Gilang Agung Persada of Jakarta. Under the agreement, FJ Benjamin, through its associate PT Gilang Agung Persada, open 25 stores within five years in Indonesia. The franchise would see FJ Benjamin distributing trendy and affordable VNC women's shoes and accessories in Indonesia. VNC products are sold under the Vincci label in Malaysia and are produced by the Padini Group.

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