Your 60-Second Guide to Dairy Farm International Holdings Ltd (SGX: D01) Shares
Sudhan Pâ—Ź
In this series, we feature one Singapore-listed company each time as a quick guide to everything you should know about it in 60 seconds.
In this instalment, we have Dairy Farm International Holdings Ltd (SGX: D01), a pan-Asian retailer. Previously, we looked at casino operator Genting Singapore Ltd (SGX: G13).
What’s Dairy Farm’s Business About?Â
Dairy Farm is a pan-Asian retail group with operations across many Asian countries and territories.
It manages supermarkets, hypermarkets, convenience stores, health and beauty stores, and home furnishings stores under famous brands such as Cold Storage, Giant, 7-Eleven, Guardian, and IKEA.
As of end-2019, Dairy Farm, together with its associates and joint ventures, operated over 10,000 outlets.
Dairy Farm is a member of Jardine Matheson Holdings Limited (SGX: J36).
Dairy Farm’s Financial HighlightsÂ
The following table shows Dairy Farm’s key financial highlights from 2015 to 2019:
| 2015 | 2016 | 2017 | 2018 | 2019 | |
|---|---|---|---|---|---|
| Revenue (US$' million) | 11,137.3 | 11,200.7 | 11,288.7 | 11,749.3 | 11,192.3 |
| Revenue, including associates and joint ventures (US$' million) | 17,907.0 | 20,423.6 | 21,827.0 | 21,957.2 | 27,665.0 |
| Net profit (US$' million) | 424.4 | 469.0 | 402.4 | 84.8 | 323.8 |
| Underlying net profit (US$' million) | 428.1 | 460.2 | 402.6 | 358.2 | 320.9 |
| Underlying earnings per share (US cents) | 31.66 | 34.03 | 29.77 | 26.48 | 23.72 |
| Net debt (US$' million) | 481.7 | 640.8 | 599.1 | 744.0 | 820.8 |
| Cash flow from operations (US$' million) | 699.8 | 542.9 | 671.3 | 1,458.1 | 1,288.1 |
| Free cash flow (US$' million) | 396.0 | 298.3 | 392.0 | 1,202.3 | 1,001.6 |
In 2018, Dairy Farm hit a snag as its net profit dropped significantly due to business restructuring.
During that year, Dairy Farm exited various underperforming stores from its food division in South-east Asia, among others, causing the company to clock a one-off expense of US$453 million.
This is part of Dairy Farm’s business transformation, which is set to take multiple years, as seen below:
In its 2019 earnings release, Dairy Farm said that its multi-year transformation continued to gain momentum during the year, with signs of progress across its businesses.
Dairy Farm’s space optimisation plan, new store formats and improvement programmes generated greater efficiencies and started to deliver tangible results last year. The company added that it expects the “progress to continue in 2020”.
Dairy Farm’s Dividend History
Next, let’s turn our attention to Dairy Farm’s dividends.
| Total dividend per share (US cents) | Dividend payout ratio | |
|---|---|---|
| 2015 | 20.00 | 63% |
| 2016 | 21.00 | 62% |
| 2017 | 21.00 | 71% |
| 2018 | 21.00 | 79% |
| 2019 | 21.00 | 89% |
The pan-Asian retailer has been paying stable dividends of 21 US cents for the last few years.
With a dividend payout ratio (total dividend divided by underlying earnings per share) of below 90% from 2015 to 2019, Dairy Farm’s dividends are well-covered too.
One Immediate Risk for Dairy Farm to Take Note Of
Even though Dairy Farm is optimistic about 2020, the COVID-19 outbreak is impacting its results.
The company said that its performance for the remainder of this year hinges on the duration, geographic extent and impact of the pandemic and the measures taken to control it.
That’s a short-term risk that investors should be aware of right now.
Dairy Farm’s Share Price and Valuation
Dairy Farm’s share price has not been performing well over the past five years.
Since April 2015, Dairy Farm’s shares have tumbled close to 50% to trade at US$4.84 at the time of writing.
At Dairy Farm’s share price of US$4.84, it sports a price-to-earnings (PE) ratio of 20 and a dividend yield of 4.3%.
In comparison, the SPDR STI ETF (SGX: ES3), which can be taken as a proxy to the Singapore stock market, has a PE ratio of around 10 and a dividend yield of 4.8%.
Using this quick comparison, it would suggest that Dairy Farm’s shares are still expensive even though they have dropped significantly since 2019.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock.Â
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