DFI Retail Group - RHB Invest 2024-08-12: Core Operating Profit Improving; Keep BUY

• We retain our BUY call for DFI Retail Group (SGX:D01) on recovery expectations and attractive valuations. 1H24 has shown decent earnings recovery and despite lowering our earnings forecast, we continue to anticipate earnings recovery into FY25F.
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• DFI's share price currently trades at an attractive 10x FY25F P/E and ~6% dividend yield.

1H24 below expectations.

• DFI’s 1H24’s revenue was US$4,405m (-4% y-o-y), while underlying profit was US$76m (+127% y-o-y), below expectations. Revenue decline was affected by the Food (US$1,579m, -6% y-o-y) and Home Furnishing (US$349m, -13% y-o-y) divisions.
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  • Home Furnishing sales were impacted by Hong Kong and Indonesia’s weak property market and temporal disruption of operations in Taiwan due to April’s Hualien earthquake.
• Operating profit outperformed at US$168m (+81% y-o-y), led by margin recovery and cost controls in the Food and Health & Beauty divisions.
• Underlying associate income missed expectations as well, at US$3m, improving from losses last year. Maxim’s contribution was affected by weak consumption, while Yonghui continued to register smaller losses – offset by Robinsons Retail’s increased contribution.

Interim dividend of 3.5 US cents

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Alfie Yeo RHB Securities Research | https://www.rhbgroup.com/ 2024-08-12 SGinvestors.io

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