CGS International
July 23, 2025

DFI Retail Group Delivers Robust 1H25 Earnings with Special Dividend Windfall: Full-Spectrum Analysis and Global Retail Peer Comparison

Executive Summary: DFI Retail Group’s 1H25 Performance Surges with Strong Health & Beauty, Special Dividend Boosts Yield

DFI Retail Group has reported an impressive 1H25 underlying PATMI of US\$105 million, representing a 39% year-on-year surge, aligning with both internal and consensus expectations. The highlight for shareholders is a surprise special dividend of 44.3 US cents per share, propelling the forecasted FY25 dividend yield to an attractive 16%. This result is largely attributed to high-performing Health & Beauty (H&B) operations and significantly improved contributions from associates. The company maintains an “Add” rating, with an upgraded target price (TP) of US\$3.86, reflecting higher earnings multiples and the inclusion of the special dividend.

Key Financial Highlights and Dividend Announcements

• 1H25 Underlying PATMI: US\$105 million (+39% YoY), forming 40%/42% of internal/consensus FY estimates.
• Special Dividend: 44.3 US cents/share—one-off, signals limited near-term reinvestment.
• Total FY25F DPS: 54.8 US cents (including interim and special dividends), payout date set for October 15, 2025.
• Capex Guidance: US\$200–220 million for FY25, targeting cost optimization, store revamps, and network expansion.
• Revenue: 1H25 revenues held flat YoY at US\$4.4 billion.
• Operating Margin: Increased 20bps YoY to 4.0% through improved sales mix and cost optimization.
• Cash Position: Despite interim/special dividends (US\$647m) exceeding the 1H25 cash balance (US\$537m), management is confident of a net cash position by year-end.

Segment Performance Review

Health & Beauty: The Standout Segment

• Revenue: 1H25 rose to US\$1.3bn (+4% HoH, +7% YoY), with like-for-like sales up 4% YoY, driven by larger basket sizes in Hong Kong and Southeast Asia.
• EBIT: US\$109m (+1% HoH, +6% YoY); EBIT margin at 8.4% (-0.1% pt YoY) due to expenses from underperforming store closures in SEA.
• Mannings in Hong Kong showed 6% YoY same-store growth, led by wellness, supplements, and derma skincare.
• 24 new Guardian stores launched in SEA, leaning into asset-light franchise models for expansion in Indonesia.

Food (Grocery Retail): Facing Headwinds but Strategically Adapting

• Revenue: 1H25 at US\$1.5bn (flat HoH, -2% YoY), reflecting softness from Hong Kong’s industry-wide supermarket sales (-1% YoY in 5M25).
• EBIT: US\$24m (-24% HoH, -5% YoY); EBIT margin stable at 1.6%.
• DFI is proactively lowering average selling prices and partnering with DingDong to increase fresh food SKUs, aiming to recapture market share lost to cross-border shopping and wet markets.

Convenience Stores: Impacted by Regulatory and Competitive Pressures

• Revenue: 1H25 at US\$1.1bn (-7% HoH, -3% YoY), mainly due to reduced cigarette sales post-tax hike in Hong Kong.
• Excluding cigarettes, like-for-like sales declined 1% YoY.
• Hong Kong sales rebounded in 2Q25 due to annualization of the cigarette tax and growth in ready-to-eat (RTE) products, which now make up 24% of segment sales (+100bps YoY).
• Singapore posted weaker LFL sales on reduced tourist traffic; South China expanded by 119 stores but faced intensified online competition.
• EBIT: US\$38m (-32% HoH, -19% YoY); EBIT margin at 3.4% (-0.6% pts YoY).

Home Furnishings: Challenged but Resilient in Taiwan

• Revenue: 1H25 at US\$328m (-7% HoH, -6% YoY), pressured by competition and shifting basket mix in Hong Kong/Indonesia.
• Taiwan operations remained stable.
• EBIT: US\$9m (up from US\$3m in 1H24), EBIT margin improved to 2.6% (+1.7% pts YoY), attributed to ongoing cost optimization.

Associates: Strong Turnaround Driven by Divestments and Operational Gains

• Underlying Contribution: US\$31m in 1H25 (up from US\$3m in 1H24).
• Maxim’s (50%-owned): Underlying profit up 75% YoY to US\$14m, driven by operational efficiencies.
• Robinsons Retail: Contribution jumped to US\$18m (from US\$9m), including two extra months before May 2025 disposal and US\$9.9m in non-core items.
• Yonghui: 21% stake divested in Feb 2025, eliminating prior losses (US\$8m loss recognized in 1H24).

Comprehensive Financial Table

Guidance Updates and Strategic Initiatives

• Profit Guidance: FY25F net profit streamlined to US\$250–270m (from US\$230–270m), matching internal forecasts.
• Revenue Growth: Organic revenue growth guidance cut to 0.5–1% for FY25F (from 2%), reflecting the Cold Storage divestment and a weaker retail environment.
• Capex and Payout: Capex guidance steady at US\$200–220m; dividend payout ratio maintained at 60% (excluding special dividend).
• Investor Day: Announcement in 4Q25F anticipated to clarify long-term strategy and monetization plans.

Global Retail Peer Comparison: Valuation and Yield

ESG Initiatives and Sustainability Commitment

• DFI Retail Group is on a transformation journey with a “Customer First, People Led, Shareholder Driven” framework.
• Key ESG Targets:
  • Halve carbon emissions by 2030 (vs. 2021 baseline), net zero for scopes 1 & 2 by 2050.
  • Annual investments of US\$15–20 million (2025–27F) to fund emissions reduction.
  • 2% YoY reduction in scope 1 and 2 emissions in 2024, energy consumption down 3% YoY.
• Enhanced ESG disclosures and progress reporting from 2022/2023.
• No current premium/discount applied for ESG in valuations; progress will be closely tracked.

Balance Sheet and Key Financial Ratios

• Total Cash (Dec-25F): US\$182m
• Total Debt (Dec-25F): US\$145m (short-term); zero long-term debt
• Shareholders’ Equity (Dec-25F): (US\$30m)
• Operating EBITDA Margin (Dec-25F): 12.3%
• Net Dividend Payout Ratio (Dec-25F): 612%
• Gross Interest Cover (Dec-25F): 2.80x
• Key Drivers – Outlets (Dec-25F):
  • Grocery retail: 524
  • Convenience store: 3,518
  • Health and beauty: 1,577
  • Home furnishings: 26

Conclusion: Outlook and Investment Perspective

DFI Retail Group’s 1H25 financial performance has been underpinned by resilience in Health & Beauty and robust associate contributions, offsetting softness in food and convenience segments. The one-off special dividend signals limited near-term reinvestment, but reflects a strong balance sheet and prudent capital allocation. The market awaits further clarity on DFI’s long-term strategic direction at its upcoming Investor Day, with catalysts likely from successful monetization plans and a fuller recovery in Hong Kong retail sales. Investors should note near-term risks from slow Hong Kong recovery and persistent cost pressures but can take comfort in the group’s improved profitability and disciplined financial management.
The upgraded target price of US$3.86 and an “Add” rating underscore DFI’s value proposition in a challenging, yet opportunity-rich, retail landscape across Asia.