DFI Retail Group - UOB Kay Hian 2023-03-06: 2022 Results Weaker Than Expected, But 2H22 Shows Signs Of Life

• DFI Retail’s weaker-than-expected 2022 results with a loss at the bottom line, due to impairments at its associates, belie the nascent recovery seen in 2H22. In particular, 2H22 witnessed sequential improvement in operating profit, operating margins, free cash flow and net debt.
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• Maintain BUY. Target price: US$3.72.

Weak 2022 results… which belie DFI Retail's nascent recovery in 2H22.

• DFI Retail Group (SGX:D01) reported weaker-than-expected 2022 results with core NPAT excluding associates down 72% y-o-y to US$29m, while net loss attributable to shareholders (which includes associates) was US$115m vs a profit of US$103m in the prior year. The loss was due to a large impairment of US$171m for Robinsons Retail in the Philippines, and US$17m for Yonghui in China, as well as higher-than-expected SG&A costs.
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• At the segmental level, only grocery saw lower revenue and operating profit on a h-o-h basis while other segments saw significant sequential improvement.
• A final dividend of US$0.02 was declared. Together with the 1H22 interim dividend of US$0.01, DFI Retail's total 2022 dividend was US$0.03. This is a significant decline from the US$0.095 paid in 2021. However, we expect dividends to pick up in 2023 given the early signs of business improvements year-to-date. See DFI Retail's dividend dates.

Management encouraged with the 2H22 recovery.

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