DFI Retail Group - CGS-CIMB Research 2022-06-24: FY22F A Year Of Investment

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

Read also CGS-CIMB's most recent report:
2022-07-29 DFI Retail Group - More Time Needed.

Price targets by other brokers at DFI Retail Target Prices.
Listing of research reports at DFI Retail Analyst Reports.

Relevant links:
DFI Retail Share Price History,
DFI Retail Announcements,
DFI Retail Dividends & Corporate Actions,
DFI Retail News Articles

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