In addition, in line with parent company Jardine Matheson's practice of uplifting dividends back to the group level, subsidiaries like DFI Retail Group are seen to continue paying dividends at an attractive level that ought to benefit other shareholders too.
The stock currently trades at an attractive 13x FY24F P/E vs Yeo's implied target P/E of 17x.
Yeo is projecting earnings to grow at a CAGR of 18% between FY2023 and FY2025, driven by "sturdy domestic consumption and a pick-up in tourism in Hong Kong, on top of the continued economic recovery in Asean and China."
In its most recent 3QFY2023 interim management statement, the company reported that underlying profit was up 80% y-o-y, thanks to its health and beauty and convenience divisions. On the other hand, grocery retail and IKEA weighed down the overall numbers.
Going forward, DFI Retail's China supermarket unit Yonghui and other grocery businesses across Asean will be keenly watched for signs of upside.
Meanwhile, downside risks include a slower-than-expected recovery in consumer spending and higher-than-expected costs, which should ultimately lead to lower margins and earnings.
