Title: 2024: Strong Return To Growth With More To Come This Year
UOB Kay Hian, 12 March 2025

DFI Retail Group Holdings (DFI SP)

Strong Execution in 2024

DFI Retail Group Holdings (DFI) reported better-than-expected 2024 underlying profit growth of 30% year-on-year to US\$201 million. [[13]] The strong performance was driven by the convenience, health & beauty (H&B) and food divisions as well as a reduction of losses from Yonghui. [[13]] The company declared a final dividend of US\$0.07 per share (1H24: US\$0.035), higher than the expected US\$0.05 per share. Total DPS of US\$0.105 (+31% year-on-year) implies a yield of 5.0% based on the previous closing share price. [[13]]

Guidance for Continued Growth in 2025

DFI guided for 2% revenue growth in 2025 and furthermore has projected an underlying profit of US\$230 million to US\$270 million, implying year-on-year earnings growth of 14-34%. [[13]] The company expects to generate this growth from the H&B and convenience segments as well as optimizing its product mix to improve margins. [[13]] Furthermore, the company disclosed that it will look to monetize the data from its yuu platform as well as advertising opportunities within its supermarkets, amongst other initiatives. [[13]]

Impairments and Non-Cash Items Impact Bottom Line

At the bottom line, DFI reported a loss of US\$245 million that was negatively impacted by impairment on its interest in Robinsons Retail, impairment of goodwill in its Macau and Cambodia food businesses, and losses related to the divestment of Yonghui. [[14]]

Stronger Balance Sheet After Sale of Yonghui

In the past 12 months, DFI has lowered its net debt by 25% to US\$468 million as at end-24, resulting in a net debt/equity of 0.79x. [[14]] During its results call, management highlighted that with the completion of the sale of Yonghui at end-Feb 25, it is now in a net cash position. [[14]] Importantly, free cash flow in 2024 remained strong at US\$909 million (-4% year-on-year). [[14]]

Standout Performances from Convenience and H&B

The convenience segment was a standout performer reporting a 17% year-on-year increase in operating profit to US\$102 million, driven by a favorable product mix shift towards higher-margin categories such as ready-to-eat offerings. [[14]] The H&B segment also delivered stable performance despite a challenging retail environment. [[14]]

Headwinds for Home Furnishings and Restaurants

The home furnishings segment disappointed with IKEA reporting an operating profit of US\$16 million (-13% year-on-year) due to weak property market conditions and increased competition in Hong Kong and Indonesia as customers put renovations on the backburner, while Chinese platforms have started to present a greater competitive threat. [[14]] The restaurants division, represented by Maxim’s, saw a 16% decline in underlying profit to US\$66 million, impacted by weaker mooncake sales and restaurant performance in mainland China. [[14]]

Valuation and Recommendation

The analyst maintains a BUY rating with a slightly higher PE-based target price of US\$2.80 (previously US\$2.57) using a target PE multiple of 16.3x which is 1 standard deviation below DFI’s average PE multiple over 2019 to present excluding the COVID-19 years of 2021-23. [[14]] With Yonghui’s losses removed and apparent stabilization of consumer behavior in its food divisions in Hong Kong and Singapore, the analyst looks forward to witnessing DFI delivering on its earnings growth in 2025. [[14]] The analyst highlights that DFI’s 2025F PE of 12.2x is a 39% discount to its regional peers but still delivers a higher prospective yield of 4.9% vs its peers’ average yield of 3.0%. [[14]]