Among others, DFI expects to grow its underlying profit at a CAGR of 11%–15% and reach US$310 million ($402.2 million) to US$350 million by 2028. In its most recent FY2024, its underlying profit was up 30% to US$201 million. It has also indicated a new dividend policy with a 70% payout ratio, effective from the final dividend of 2025, up from the previous 60% payout guidance.
In his Dec 4 report, Chee Zheng Feng from DBS Group Research says that DFI Retail’s management has laid out clear strategies and financial targets for each operating segment, with growth rates for certain segments exceeding his existing bullish forecasts. He points out that health & beauty revenue growth will be underpinned by franchise-led store expansion in Indonesia and a stronger push into the fast-growing wellness category. “The higher margin health & beauty and convenience businesses are expected to be the main growth engines for both revenue and earnings,” says Chee.
DFI operates a chain of 7-Eleven convenience stores in southern China and other markets, a segment in which the company is bullish. “For convenience, the company is upgrading its higher margin ready-to-eat offering, with expanded fresh hot food offerings and ongoing product innovation. It also sees substantial white space for store expansion in Tier 2 cities in South China,” comments Chee.
With that, he is maintaining his “buy” call and raising his target price from US$3.90 to US$4.50 on a higher valuation peg of 21.1 times P/E, which is +0.5 standard deviations above its 10-year average, supported by well-defined earnings targets, a sensible strategy, and a higher dividend payout ratio.
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Meanwhile, in his report dated Dec 4, Alfie Yeo of RHB Bank Singapore is maintaining his “buy” call on DFI Retail and raising FY2026 and FY2027 earnings by 2% and 1% respectively, based on management’s new FY2028 earnings guidance on store network expansion, better margins, and operating efficiency.
“Management projects FY2025 to FY2028 sales growth (excluding the recently divested Singapore food business) at 2% to 3% CAGR, driven by the health & beauty and convenience store (CVS) segments.
Yeo points out that DFI Retail is targeting FY2028 operating margin expansion of 5% to 7%, up from 3.9% in FY2024. Yeo points out that DFI Retail is targeting an operating margin expansion of between 5% and 7% in FY2028, up from 3.9% in FY2024.
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“Cash raised from the sale of stakes in Yonghui Superstores and Robinson’s Retail Holdings will now provide DFI with the financial flexibility to conduct strategic M&A activities,” comments Yeo, referring to two major divestments by DFI in recent years.
Hence, Yeo raises his target price from US$4.25 to US$4.50 after he rolls his valuation from 21 times blended FY2025 and FY2026 P/E ratio to FY2026’s earnings base.
Finally, Lim Siew Khee and Meghana Kande of CGS International (CGSI) highlighted in their report dated Dec 4 that the sales targets set by DFI Retail were mainly in line with what they had already baked into their FY2025 to FY2027 estimates.
“However, management expects superior margins across all segments, which we think backs DFI Retail’s higher dividend payout guidance of 70% vs 60% previously,” states Lim and Kande.
In CGSI’s view, DFI Retail could be looking for inorganic opportunities within high-growth segments, for example, in the health & beauty markets of Indonesia and Vietnam, and also in the convenience segment of China.
“We believe DFI Retail’s 25% target leverage ratio gives it funding flexibility to pursue majority-stake acquisitions that meet its 15% ROCE threshold and complement existing formats. If a deal does not materialise within 24 months, DFI Retail plans to return cash to shareholders, likely through a special dividend rather than share buybacks due to DFI’s low liquidity,” says the CGSI team.
Both Lim and Kande are reiterating their “add” call on DFI Retail, citing potential margin expansion and net profit growth over FY2025 to FY2028. They raised their target price from US$4.00 to US$4.50 following 6% to 10% hikes in their EPS estimates for FY2026 to FY2027, based on an 18 times FY2027 P/E ratio, which is +2.0 standard deviations above the five-year mean.
