DFI Retail Group - RHB Invest 2022-07-29: Not Out Of The Woods Yet


DFI Retail Group - Not Out Of The Woods Yet

  • DFI Retail Group (SGX:D01)’s 1H22 results were disappointing, as it reported a core loss as a result of movement restrictions and lockdowns in key North Asia markets. Recovery prospects hinge on COVID-19 containment in China and Hong Kong, as well as the approach the Governments take to manage the pandemic.
  • Current valuation may have priced in most of the negatives, in our view, and hence, we keep our NEUTRAL stance. Maintain NEUTRAL on DFI Retail Group with new US$2.71 target price from US$2.88, 8% downside.

DFI's 1H22 results were below expectations

  • DFI Retail Group's 1H22 results were below expectations, after reporting a 1H22 core LTAMI of US$52m. The negative deviation could be attributed to the imposition of movement restrictions and lockdowns in key North Asia markets including China and Hong Kong, following the surge in COVID-19 cases.
  • Post results, we slash our FY22-24F earnings forecast for DFI Retail Group by 78%, 24%, and 20% respectively. Correspondingly, our DCF-derived target price is revised down to US$2.71 (inclusive of a 2% ESG discount).
  • The new target price implies 18x P/E FY23F which is close to -1 standard deviation of DFI Retail Group’s 5-year mean, which we believe is justified by the challenging and uncertain recovery outlook.
  • Y-o-y, DFI Retail Group's 1H22 revenue eased 1% to US$4.5bn, or +2% if excluding the impact of the Giant Indonesia restructuring. Recoveries in the Health & Beauty and Home Furnishing segments, on the back of the broader economic reopening, were offset by weaker grocery retail sales, which were affected by the easing of movement restrictions – leading to a reduction in eating-at-home – store renovation disruptions in Singapore, and stock availability issues in Malaysia.
  • Meanwhile, Maxim’s, DFI Retail Group’s 50%-owned associate, was negatively impacted by the Government-imposed dining restrictions in Hong Kong, as well as temporary lockdowns on the Chinese mainland. Coupled with the higher investment to drive e-commerce and higher opex, 1H22 core operating profit dipped 51% to US$76m.


  • DFI Retail Group remains cautious of the challenging business environment and uncertainties ahead, considering the stringent approach taken by the governments to contain COVID-19 in North Asia markets, which accounted for 76% of the total 1H22 sales.
  • On top of that, the supply chain disruptions and inflationary pressures would also be relevant headwinds that will pose downside risks to the recovery of DFI Retail Group’s businesses going forward. That said, DFI Retail Group’s investment to enhance its digital capabilities and continuous efforts to improve store operations should mitigate some of the impact, and place it in a good position to capture the spending recovery once the pandemic is broadly contained in its key markets.
  • See
  • Key risks to our recommendations include better or worse-than-expected pandemic containment in key markets and easing/intensified movement restriction enforcements in key markets.

Singapore Research RHB Securities Research | https://www.rhbgroup.com/ 2022-07-29
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 2.700 DOWN 2.88