DBS Group Research has maintained its "buy" call on DFI Retail Group D01 Holdings, while keeping its target price at US$3 despite both softer top and bottom lines flagged by the company in its 3QFY2024 business update.
The company on Nov 14 reported revenue for its quarter ended Sept was down 3% y-o-y and underlying earnings down 4%.
Growth at its health and beauty segment was weighed down by high base effect last year when government spending in Hong Kong gave this segment a temporary boost.
"The softness in 3Q24 was largely within our expectations considering the soft China macroeconomic headwinds," says DBS in its Nov 15 note.
"Management continues to demonstrate strong execution despite the macroeconomic headwind in terms of margin expansion through improved product mix and cost discipline," adds DBS.
For the full year ending December, DFI Retail expects underlying profit to reach between US$190 million and US$220 million, a slightly upward tightening from the earlier guidance range of between US$180 million and US$220 million, notes DBS, which is projecting US$198 million
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DBS is further cheered by how DFI Retail Group is making progress in reducing its debt, with debt as at Sept 30 US$445 million versus US$549 million as at end of June.
"The current deleveraging trajectory also looks very promising tracking ahead of our expectations, which could translate to higher probability of special dividend," says DBS, which was expecting debt level to hold at US$561 million at end of the year.
DFI Retail Group closed at US$2.38 on Nov 14, unchanged for the day.
