DFI Retail Group Optimizes Grocery Footprint, Unlocks Significant Cost Savings

Broker: CGS International

Date: March 24, 2025

Selling Singapore Grocery Business for \$125M

DFI Retail Group (DFI) has announced the sale of its Singapore grocery business, including around 90 stores of the Cold Storage, CS Fresh, Jason’s Deli and Giant brands, to Malaysian company Macrovalue (Unlisted) for a cash consideration of S\$125m (c.US\$94m). [[1]]
The transaction is expected to be completed by 2H25F, after which DFI’s Food segment will include the Wellcome and Market Place brands in Hong Kong (c.323 stores), San Miu in Macau (c.22 stores) and Lucky in Cambodia (c.84 stores). DFI has been streamlining its grocery presence with recent exits from Malaysia, Indonesia, and its associate Yonghui in China. 1

Significant Cost Savings from Divestment

DFI’s Singapore subsidiary (including supermarkets, 7-Eleven and Guardian) recorded revenues of S\$2.1bn in FY23 and roughly broke even on an EBIT level. The grocery business is estimated to have accounted for around 50% of Singapore’s FY23 sales. [[1]]
CGS International analysts estimate DFI could capture c.US$230m of operational cost savings from the Singapore grocery business sale, translating to a c.0.4%-pt uplift from FY24’s underlying EBIT margin of 3.9%. 1

Potential for Special Dividend

As of end-2024, DFI had net debt of US\$468m. The company plans to use most of its c.US\$620m proceeds from the recent Yonghui stake sale to repay debt. Following the Singapore divestment, there is potential for a special dividend of at least c.4 UScts per share (based on a 60% payout of the US\$94m proceeds). This would imply a dividend yield of c.6.6% for FY25F. [[1]]

Reiterate Add Rating on Cost Efficiencies

CGS International reiterates its Add call on DFI Retail, citing cost efficiencies from its streamlined business portfolio. The target price stays at US\$2.71, based on 13.2x P/E (c.1 s.d. below its five-year historical 12M forward P/E average). [[1]]
Key re-rating catalysts include faster recovery of its Hong Kong supermarket sales, announcement of a special dividend, and higher-than-expected growth in Southeast Asia. Downside risks include a slow economic recovery in Hong Kong affecting sales growth, and cost pressures impacting margin uplift. 1

Global Peer Comparison

| Company | Ticker | Recom. | Price (lcl curr) | Target (lcl curr) | Market Cap (US\$ m) | P/E (x) CY25F | P/E (x) CY26F | P/BV (x) CY25F | Recurring ROE (%) CY25F | Div Yield (%) CY25F | |———|——–|——–|—————–|——————|——————-|—————|—————|—————–|————————-|——————-| | DFI Retail Group | DFI SP | Add | 2.34 | 2.71 | 3,168 | 12.0 | 11.4 | 5.49 | 45.6% | 4.9% | | Sheng Siong Group | SSG SP | Add | 1.64 | 1.90 | 1,848 | 17.2 | 16.6 | 4.27 | 25.6% | 4.1% | | Singapore Grocery Retail Average | | | | | | 14.6 | 14.0 | 4.88 | 35.6% | 4.5% | | Sun Art Retail Group | 6808 HK | Add | 1.82 | 2.30 | 2,233 | 38.5 | 21.8 | 0.74 | 1.9% | 1.0% | | Yonghui Superstores | 601933 CH | Hold | 4.76 | 5.80 | 5,960 | 58.9 | 47.2 | 8.38 | 14.3% | 0.0% | | MINISO Group Holding Ltd | 9896 HK | NR | 35.65 | N/A | 5,732 | 13.0 | 10.6 | 3.36 | 26.9% | 3.5% | | Sa Sa International Holdings L | 178 HK | NR | 0.65 | N/A | 259 | 13.8 | 14.8 | 1.63 | 11.8% | 5.6% | | Chow Tai Fook Jewellery Group | 1929 HK | NR | 8.62 | N/A | 11,075 | 13.0 | 11.9 | 3.02 | 23.4% | 6.0% | | Cafe de Coral Holdings Ltd | 341 HK | NR | 7.55 | N/A | 563 | 13.9 | 12.4 | 1.50 | 11.1% | 7.9% | | China Tourism Group Duty Free | 1880 HK | NR | 50.80 | N/A | 17,454 | 17.2 | 14.8 | 1.64 | 10.5% | 2.8% | | Hong Kong/China Retail Average | | | | | | 24.1 | 19.1 | 2.90 | 14.3% | 3.8% | | 7-Eleven Malaysia Holdings | SEM MK | Hold | 1.97 | 1.98 | 494 | 26.8 | 22.8 | 4.66 | 18.2% | 2.2% | | Aeon Co M Bhd | AEON MK | NR | 1.34 | N/A | 424 | 11.6 | 10.8 | 0.93 | 8.5% | 3.7% | | Malaysia Retail Average | | | | | | 19.2 | 16.8 | 2.79 | 13.4% | 2.9% | | Aspirasi Hidup Indonesia Tbk P | ACES IJ | Add | 500 | N/A | 517 | 8.9 | 7.9 | 1.23 | 14.1% | 6.3% | | Ramayana Lestari Sentosa Tbk P | RALS IJ | NR | 342 | N/A | 146 | 6.2 | 5.5 | 0.54 | 8.1% | 12.4% | | Mitra Adiperkasa Tbk PT | MAPI IJ | Add | 1,260 | N/A | 1,263 | 9.5 | 8.2 | 1.59 | 18.0% | 1.3% | | Industri Jamu Dan Farmasi Sido | SIDO IJ | Hold | 565 | N/A | 1,023 | 13.5 | 12.5 | 4.60 | 34.7% | 6.6% | | Indonesia Retail Average | | | | | | 9.5 | 8.5 | 1.99 | 18.7% | 6.7% | | Puregold Price Club Inc | PGOLD PM | Add | 25.95 | 37.25 | 1,303 | 7.1 | 6.7 | 0.72 | 10.5% | 4.0% | | Robinsons Retail Holdings Inc | RRHI PM | Add | 38.20 | 57.50 | 945 | 9.5 | 8.1 | 0.65 | 6.9% | 5.2% | | Philippines Grocery Retail Average | | | | | | 8.3 | 7.4 | 0.68 | 8.7% | 4.6% | | CP All | CPALL TB | Add | 51.25 | 66.50 | 13,601 | 16.2 | 14.5 | 3.22 | 21.0% | 3.1% | | Berli Jucker | BJC TB | Hold | 21.60 | 24.50 | 2,557 | 17.0 | 16.0 | 0.71 | 4.2% | 3.8% | | Home Product Center | HMPRO TB | Add | 7.95 | 9.80 | 3,089 | 15.4 | 14.1 | 3.76 | 24.7% | 5.2% | | Thailand Grocery Retail Average | | | | | | 16.2 | 14.9 | 2.56 | 16.6% | 4.0% | | Average (simple) | | | | | | 15.3 | 13.4 | 2.63 | 17.9% | 4.4% | | Average (simple) – Excluding DFI | | | | | | 15.7 | 13.9 | 2.53 | 16.2% | 4.4% |
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