Based on ARN's FY25 disclosure, Cody HK reported negative net assets of US$17 million, largely due to significant provisions, compared with positive net assets of US$0.4 million in 1H2025.
The business also recorded a loss before tax of US$27 million in FY2025 versus US$9 million in FY2024.
Despite the reported losses, Cody HK remained slightly cash flow positive, generating net cash of approximately US$0.5 million.
Chee says that at first glance, the acquisition appears immaterial given its modest purchase price.
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Given the recent correction in DFI's share price, Chee believes that investor concerns could be centred on Cody HK's reported US$27 million pre tax loss and if it continues, could be a drag on DFI’s earnings momentum in the medium term.
Chee believes that the FY2025 losses were likely inflated by one-off expenses, given the substantially better FY2024 performance.
Using FY2024's US$9 million pre-tax loss as a more representative earnings base, Chee estimates the acquisition would result in a US$2 million drag on FY2026 earnings on a pro-rated basis, representing less than 1% of his FY2026 net profit forecast of US$293 million.
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On a fully annualised basis, the impact would be around US7 million in FY2027, equivalent to roughly 2% of his FY2027 earnings forecast of US$316 million, which remains relatively immaterial.
"More importantly, we view the acquisition as a strategic step in scaling DFI's retail media business into a meaningful and potentially high margin growth engine," says Chee.
He points out that Cody's extensive outdoor media network significantly expands DFI's media footprint and complements its existing in store and digital advertising assets.
According to Chee, retailers are generally willing to commit meaningful advertising budgets only when media platforms achieve sufficient scale, particularly in physical advertising formats.
"A broader network allows brands to achieve greater visibility and consumer reach, rather than being limited to smaller in store screens.
Looking beyond the near-term earnings impact, Chee expects this acquisition to be a sensible move that strengthens DFI's retail media proposition, although building a scaled and highly profitable media platform will likely be a multiyear journey.
DFI Retail closed at US$3.65, down 0.27%.
