You are here

Brokers' take: DBS downgrades Dairy Farm to 'hold' on slower growth outlook

CITING a weaker growth forecast, DBS Group Research has downgraded its rating on Dairy Farm International Holdings from "buy" to "hold", revising down its target price on the counter to US$9.35 from US$9.77. 

As at 4.03pm on Friday, the stock was trading at US$9.16 apiece, down seven Singapore cents or 0.8 per cent. 

Said DBS analysts Alfie Yeo and Andy Sim: "We believe Dairy Farm's outlook will be relatively slower on higher operating costs; more time needed to turnaround the supermarket or hypermarket business; and lower contribution from Yonghui going forward."

The analysts also noted that Dairy Farm's earnings for the first half this year came in at US$215 million, which is below their estimate, despite a 7.7 per cent year-on-year growth in revenue. 

"The lower than expected earnings was led mainly by higher operating and net interest costs, as well as lower associate contribution. Interim dividend per share of 6.5 US cents was declared, in line with our expectations," they said.

Your feedback is important to us

Tell us what you think. Email us at

DBS added that key catalysts for the counter include faster than expected earnings turnaround from Yonghui and Dairy Farm’s core business, which will depend on the successful implementation of strategies by new CEO Ian McLeod.

"We believe any share price upside will be driven by earnings recovery over the longer term. Upside risk on the stock is based on Dairy Farm’s ability to turn in more efficient operations going forward that will drive earnings growth."

Nonetheless, the brokerage is of the view that earnings would have to "improve significantly" to derail its neutral bias on the stock. 

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to