RHB Bank Singapore analyst Alfie Yeo has kept “buy” on DFI Retail Group D01 with a lower target price of US$2.61 ($3.45) from US$2.81 previously.
Although DFI’s 1HFY2024 ended June underlying profit missed expectations, Yeo highlights the outperformance of the company’s operating profit, which grew 81% y-o-y to US$168 million led by margin recovery and cost controls in the food and health and beauty divisions.
“While 1HFY2024’s results saw weaker-than-expected sales and joint venture (JV) and associates’ contribution, margin recovery of the food division was encouraging,” says Yeo.
Following 1HFY2024’s revenue miss as well as milder outlook on Hong Kong’s retail sales, RHB has lowered its revenue estimates by 5%-10%. However, Yeo has imputed higher operating margins and leverage on operating cost efficiencies, which results in RHB’s FY2025-FY2026 operating profit estimates remaining largely unchanged.
The analyst has also reduced his estimates for JV and associates’ income, following 1HFY2024’s disappointment. These have resulted in a FY2024-FY2026 recurring net profit cut of 6%-7%.
The stock currently trades at an attractive 10x FY2025 P/E and about 6% dividend yield, Yeo points out.
As at 11.34am, shares in DFI are trading 6 US cents higher or 3.22% up at US$1.92.
