DFI Retail Group: Farewell to Food, Embracing Higher-Margin Segments
UOB Kay Hian Research Report | 25 March 2025
Retail Reinvention Continues as DFI Exits Singapore Food Business
DFI Retail Group Holdings (DFI SP) has announced the sale of its Singapore food business, including the Cold Storage, CS Fresh, Jason’s Deli and Giant brands, for S$125 million to Macrovalue. This move comes as no surprise, given DFI’s recent divestments in the food segment across China, Indonesia, and Malaysia over the past two years. 2
The timing of the sale, just three weeks after DFI reported its 2024 results, was faster than expected. However, the rationale is clear – DFI’s food business only managed a 1.8% operating profit margin in 2024, with a projected expansion to 2.0% in 2025, significantly lower than the 2.3% to 8.5% margins in its other segments. 2
Positioning for Growth in 2025
Despite the sale of the Singapore food business, DFI’s guidance for 2025 remains unchanged. The company still expects 2% revenue growth and an underlying profit of US$230 million to US$270 million, implying year-over-year earnings growth of 14-34%. 2
DFI has stated that its growth in 2025 will come from the health & beauty (H&B) and convenience store segments, as well as optimizing its product mix to improve margins. The company also plans to focus on higher ROCE (return on capital employed) businesses and avoid minority positions in companies, which could put its total shareholder returns in the hands of third parties. 3
Utilization of Sale Proceeds
With the completion of the Yonghui divestment in late February 2025, DFI has turned into a net cash company. The S$125 million in proceeds from the sale of the Singapore food business is expected to further strengthen DFI’s balance sheet and potentially lead to higher-than-expected dividends for shareholders. 3
Our current estimate of DFI’s total dividend per share (DPS) for 2025 remains unchanged at US$0.103, implying a 4.9% dividend yield based on the closing price on 24 March 2025. 3
A More North Asia-Focused Company
After the sale of its Singapore food business, DFI will derive a larger portion of its revenue and profits from its north Asia operations. The company plans to invest more in its higher-margin H&B and convenience store segments, which generated operating profit margins of 6.1% and 8.5%, respectively, in the second half of 2024. 3
DFI has also stated that it will focus on acquiring businesses that are accretive to its ROCE, avoiding minority positions that could dilute its control over shareholder returns. 3
Maintaining Our BUY Rating
We maintain our BUY rating on DFI Retail Group with an unchanged target price of US$2.80, based on a target PE multiple of 16.3x, which is 1 standard deviation below the company’s average PE from 2019 to the present, excluding the COVID-19 years of 2021-2023. 3
At a 2025 forward PE of 12.6x, DFI trades at a 37% discount to its regional peers, while offering a higher prospective dividend yield of 4.9% compared to the peer average of 3.0%. 3
Key Catalysts and Risks
Potential catalysts for DFI’s share price include:
Maintaining sales momentum in the convenience store segment and introducing higher-margin ready-to-eat products
Accretive acquisitions that improve ROCE
Monetizing its DFIQ media platform and data from its yuu customer loyalty program 3
Key risks include rising food costs and inflation affecting consumer spending, as well as competition from rivals leveraging advanced technologies and innovative business models. 3
