KUALA LUMPUR (July 17): Padini Holdings Bhd (KL:PADINI) surged to a four-month high on Friday, after the apparel company announced that all of its bank accounts have been released by authorities.
The release removes operational and legal uncertainty weighing on Padini’s shares for months, CIMB Securities said. The absence of arrests, charges or forfeiture proceedings should also help investors price out the legal risks, the research house said.
“We view this development positively and believe it represents the best possible outcome for Padini at this stage,” CIMB Securities said, reiterating ‘buy’ call on the stock with target price of RM1.42.
The stock rose as much as 23 sen or 16% to RM1.65, its highest since March 25, on the back of a surge in trading volume. Padini was trading at RM1.61 at 9.30am, as more than 7.5 million shares exchanged hands. At the last price, the company had a market capitalisation of RM1.6 billion.
Shares of Padini have been under pressure even before news about the investigation broke in April, as the company grapples with weaker consumer spending and underwhelming earnings. Friday’s surge helped trimmed the stock’s year-to-date loss to about 6%.
The consensus remained largely bullish on Padini with five 'buy' and three 'hold' and no 'sell' calls, according to analysts tracked by Bloomberg. The average target price is RM1.80.
“We believe Padini could re-rate as the market largely prices out the risk premium associated with the investigation,” CIMB Securities added.
On Thursday, Padini also announced that no director, officer, employee or representative of the group had been arrested or charged in connection with the investigation by the Malaysian Anti-Corruption Commission (MACC).
Neither the holding company nor any member of the group has been subject to forfeiture proceedings in connection with the investigation, Padini added.