Dairy Farm - RHB Invest 2016-05-06: Profit Recovery In-Line for Our Conviction BUY Call

DAIRY FARM D01.SI

Dairy Farm 1Q15 Interim Statement: Profit Recovery In-Line for Our Conviction BUY Call

Dairy Farm issued their interim statement for 1Q16 (the company only announces half-yearly, but provides some broad outlook statement in the interim), which is broadly in-line with our expectations of a profit recovery in 2016.
- Underlying earnings unchanged YoY, this stems a decline in place since last year
- Food division still under margin pressure, but increased contribution from Yonghui and San Miu acqusitions
- Home furnishing (IKEA) and Maxim (food catering) continues to do well
Share price has recovered from USD5.90 to USD6.90 since we upgraded to conviction BUY in March 2016, and we think it reflects the bottoming-out of profitability this year as per our investment thesis.
Our previous TP was USD8.50 (still 30% upside from here) and we think the catalyst for this will be further evidence of medium-term margin upside over the next twelve months.

James Koh RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-06

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 8.50 Same 8.50