Broker's take: RHB upgrades Delfi to 'buy' following share price correction
RHB has upgraded confectionery maker and distributor Delfi to "buy" from "neutral", despite the company's weak second-quarter results, as its share price has corrected by 31 per cent. RHB expects that the company will recover in FY18, bolstered by improved consumer spending in its target markets and cost cutting at the company.
It raised its target price to S$1.86, a 22 per cent increase over its current price of S$1.52.
The downturn in consumer purchasing power and higher distribution costs faced by the company has been factored in, RHB says, setting the stage for a recovery in share price.
Indonesia plans to increase its non-cash subsidy to more lower middle-income groups, which RHB expects will boost consumer spending in Delfi's key market.
RHB also highlighted Delfi's likely recovery from expanded distribution to the burgeoning number of convenience stores.
The company also secured a gross margin of 33 per cent for H1 2017, aided by falling cocoa prices.
RHB cautioned in its research note that risks included a slow recovery in consumer sentiment and increased competition from foreign brands.
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Companies & Markets
Cordlife directors offer differing views on future oversight if board is rejigged
Tesla lays off more staff in software, service teams, Electrek reports
Robinhood Crypto gets Wells notice from US SEC
Morgan Stanley strategists see inflation as key for path of US stocks
US: Wall Street opens higher as rate-cut hopes linger
Tyson raises outlook as lower costs boost chicken segment