DFI Retail Group - FY22F A Year Of Investment
- While we think that the worst is likely over for Hong Kong retail sales with easing COVID-related restrictions since late-Apr 22, and roll out of HK$10,000 consumption voucher scheme, we continue to see a bumpy path to recovery for DFI Retail Group (SGX:D01).
- Given HK and Mainland China’s current divergence in COVID strategy, we see significant challenges to borders reopening in the near-term. We further delay our recovery expectations for DFI Retail Group’s Health and Beauty segment (biggest earnings contributor for DFI Retail Group pre-COVID), as we think it is unlikely to see a meaningful return of Chinese tourists in FY22F.
- Meanwhile, DFI Retail Group’s other operating segments are impacted by various macro challenges, including higher pandemic-related costs, supply chain constraints, and higher utility expenses etc.
- DFI Retail Group also intends to further invest in e-commerce capabilities (yuu-to-me in Hong Kong, Cart in Singapore) as part of its transformation roadmap.
- A bright spot is the potential turnaround in associate Yonghui’s (601933 CH) in FY22F, given reduced subsidy levels for community group purchase platforms, which has improved competitive environment.
- We forecast DFI Retail Group’s net profit to fall 17% y-o-y in FY22F. We retain our HOLD call on DFI Retail Group in view of the continued challenging operating environment. Our target price for DFI Retail Group is lowered to US$2.70, still based on 16.0x CY23F P/E (2 standard deviation below DFI Retail Group’s 5-year historical mean).
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
ONG Khang Chuen CFA CGS-CIMB Research | Kenneth TAN CGS-CIMB Research | https://www.cgs-cimb.com 2022-06-24 2022-06-24
Read also CGS-CIMB's most recent report:
2022-07-29 DFI Retail Group - More Time Needed.