Analysts are keeping a positive stance on DFI Retail Group , despite the fact that it has reported a loss of US$244.5 million ($325.41 million) for FY2024 ended Dec 31, 2024, a reversal from the US$32.2 million in earnings reported in the same period a year ago.
The group’s reported results were impacted by non-trading losses attributable to shareholders of US$445 million. This was due to a loss of US$114 million which is associated with the divestment of Yonghui, a US$231 million impairment of interest in Robinsons Retail and US$133 million goodwill impairment of Macau and Cambodia Food businesses.
The group’s underlying profit attributable to shareholders for FY2024 stood at US$200.6 million, up from the US$155 million reported in FY2023.
The group says that despite the large non-trading losses reported, it is now in a net cash position following the completion of the Yonghui transaction in February 2025.
DFI’s revenue for FY2024 came in at US$24.9 billion, down 6% y-o-y due to lower sales at Yonghui.
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Following that, DBS Group Research is keeping its “buy” call and US$3.00 target price.
“Our dividend assumption is adjusted to reflect a 60% payout ratio, allowing the company to retain capital for potential M&A. Despite this, its valuation remains undemanding at 11 times forward PE and a 5.4% yield (based on US$2.11 share price),” say analysts Chee Zeng Feng and Andy Sim. They expect possible special dividend in the event the group does not manage to find any attractive M&A targets.
The way the analysts see it, DFI is is sharpening its retail strategy to focus on value, aligning with cost-conscious consumers. In its food and health & beauty segments, the company restructured the approach to its own brands, pricing each SKU 10% lower than national brands while maintaining a higher margin.
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In its home furnishing segment, it is reinforcing Ikea’s quality and ensuring all-in cost with delivery remains competitive with rivals.
“However, we have revised the earnings mix. We reduced associates’ income due to continued weakness in Maxim’s business and raised interest expenses given slower-than-expected debt repayment,” say the analysts. This is then balanced by higher Ebit, as stronger-than-expected FY2024 margins are expected to persist into FY25F.
Given macroeconomic softness in North Asia, Chee and Sim are taking a cautious stance on revenue growth, keeping it flattish, compared to the company’s 2% growth outlook.
Meanwhile, management is considering M&A opportunities in existing formats and geographies, with a focus on earnings-accretive, controlling stakes.
On the other hand, UOB Kay Hian too is maintaining its “buy” call but with a higher target price of US$2.80 from US$2.57 previously.
Analyst Adrian Loh is focusing on the group’s underlying net profit, which came in higher than expected, driven by the convenience, health & beauty and food divisions, as well as a reduction of losses from Yonghui. And the higher-than-expected dividend of 7 US cents per share.
Loh is upbeat on the group’s positioning for 2025, with plans for revenue growth, potential monetisation of its yuu platform and advertising opportunities within its supermarkets.
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“We have upgraded our FY2025-FY2026 net profit estimates by 2%-6% to take into account the company’s better earnings visibility and momentum in its health & beauty and convenience segments. We note that our FY2025 profit estimate of US$233 million is at the bottom end of the company’s net profit guidance of US$230 million – US$270 million and would hope to upgrade numbers as the year progresses,” says Loh.
“With Yonghui’s losses removed and apparent stabilisation of consumer behaviour in its food divisions in Hong Kong and Singapore, we look forward to witnessing DFI delivering on its earnings growth in FY2025,” he adds.
As at 3.30 pm, shares in DFI are trading at US$2.28.
