DFI Retail Group - DBS Research 2024-09-26: Share Price Rally Has Just Begun; Transformation Accelerates With Yonghui Sale

• We saw a 9% one-day spike of DFI Retail Group's share price on 24 Sep 24, after DFI's announcement that the entire Yonghui stake is to be sold to Miniso Group for ~US$635mil.

Sharp rally on announcement of sale of Yonghui stake.

• - Read this at SGinvestors.io -
• We believe DFI's share price has more room to run, for three key reasons:
  1. Implications of Yonghui’s transaction is not fully priced in by the market,
  2. - Read this at SGinvestors.io -
  3. its valuation remains attractive.

How do we see the Yonghui sale proceeds flowing through in terms of financials?

Proceeds to be allocated to organic growth, debt repayment, dividend growth, and other corporate actions in order of priority.

• Assuming a more aggressive expansion stance (i.e. possibly convenience store expansion) and debt repayment, we lifted our capex expectation to US$270mil (previously: US$216mil) and debt repayment to US$550mil (previously: US$150mil) in FY25F.
• Accordingly, we estimate that DFI could see US$19mil in interest savings.

Raised FY25F core earnings by 18% from US$220mil to US$259mil on lower interest costs and exclusion of Yonghui’s losses.

• Read more at SGinvestors.io.

Zheng Feng CHEE DBS Group Research | Andy SIM CFA DBS Research | https://www.dbs.com/insightsdirect/ 2024-09-26 SGinvestors.io

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