The Business Times

Brokers' take: RHB upgrades Dairy Farm to 'buy', citing attractive valuation for recovery

Jeanette Tan
Published Mon, Jul 19, 2021 · 12:12 PM

ANALYSTS from RHB on Monday issued an upgraded "buy" call for Dairy Farm International Holdings D01  : D01 0% (DFI), citing in a report its valuation that "presents a good opportunity for investors seeking to position for a cyclical recovery".

Its target price on the stock remains unchanged at US$4.78, representing a 16.9 per cent upside on Monday's closing price of US$4.09.

"Essentially, the better containment of pandemic situation and smooth ramp-up in vaccination progress, particularly in the North Asia region, augurs well for DFI considering its strong presence and entrenched network of stores," the research house said. "The gradual and broader economy reopening should in turn drive footfalls and earnings recovery for its Health & Beauty (H&B), convenience stores, and restaurants businesses."

Turning to Dairy Farm's businesses, RHB projects growth in restaurants, convenience stores and home furnishings in view of relaxed lockdown restrictions around the region, even as it expects the group's high grocery retail earnings to taper off. On the health and beauty front, the analysts predict continuing challenges as long as tourism and shopping mall footfalls do not see recovery.

All said, though, the research team anticipates a 10 per cent earnings growth in FY2021.

The analysts noted the retail group's plans to strengthen its China operations in the areas of systems upgrading and product innovation, as well as protect its existing market share in Hong Kong. In South-east Asia, RHB mentioned the company's efforts to introduce new concept stores, and on the whole ramping up its e-commerce capability.


Start and end each day with the latest news stories and analyses delivered straight to your inbox.


On the environment, social and governance front, RHB also praised Dairy Farm's moves to source for more sustainable products for its retail businesses, citing two food examples, as well as reducing and recycling plastic products in its production lines and initiatives. It also acted to support its staff through a union initiative, the research team said.

Ultimately, despite reporting a 16 per cent full-year net profit decline in March on Covid-19-induced disruptions, as well as lower sales at its grocery retail businesses in the first quarter of this year, Dairy Farm said in May when it reported these earnings that it "remains encouraged by the progress made in the transformation of the business" in view of underlying profitability surpassing profits achieved in the first quarter of 2019.

Correspondingly, RHB projects a downward trend of price-to-book ratio in the coming two financial years, and an upswing in dividend yield over the same period.

Shares of Dairy Farm International closed unchanged at US$4.09 on Monday.


  • Dairy Farm's Q1 overall business performance hurt by ongoing Covid-19 pandemic
  • Dairy Farm full-year net profit falls 16% to US$271m


BT is now on Telegram!

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

Capital Markets & Currencies


Get the latest coverage and full access to all BT premium content.


Browse corporate subscription here