Brokers' take

Dairy Farm | Buy

Target price: US$8.50

March 21 close: US$5.96

RHB Research, March 21

We believe there is much room to improve on gross margin in its supermarket/hypermarket segment, as the company reiterated its commitment to increase direct sourcing. This would be further enhanced through the addition of new fresh-food distribution centres (DC) in Singapore in 2016 and Malaysia in 2017, as well as collaboration with its new associate Yonghui Superstores.

We estimate that corporate brand sales have been increasing by double-digit growth year on year in the past 24 months. Management aims to push the sales proportion in this category from below 10 per cent to 20 per cent over time. This would improve overall margins and create differentiation, especially in its Health & Beauty category. Share price and valuations are at their lowest point since 2010, presenting investors with a once-in-a-decade opportunity to …