CGS International
Date of Report: August 27, 2025
DFI Retail Group: Margin Expansion, Strategic Transformation, and Sector Peer Analysis – August 2025 Broker Review
DFI Retail Group: Navigating Margin Growth Amid Strategic Shifts
DFI Retail Group, a leading retailer in Singapore and Hong Kong, is at the cusp of a multi-year transformation, targeting margin improvement and operational efficiency. With a recalibrated target price of US$3.45 (from US$3.86), based on a 17x FY26F P/E, CGS International reiterates an “Add” rating, citing enhanced cost management and lower financing costs as key catalysts for shareholder returns.
Health & Beauty Segment: Margin Rebound Expected
DFI forecasts its Health & Beauty (H&B) segment EBIT margin to rise to 8.9% in 2H25F, up from 8.4% in 1H25, which faced pressures from store closures in Malaysia.
Store rationalisation is largely complete, positioning the Guardian brand for growth in high-traffic Southeast Asian malls and expansion into tier 2 Indonesian cities via an asset-light franchise model.
Mannings outlets in Hong Kong are seeing strong wellness demand, with premium healthcare products benefitting from rising Chinese tourist arrivals (+10% YoY in 7M25).
Capex guidance for 2H25F is US$150m, mainly for H&B and Convenience store investments.
Grocery Retail: Margin Improvement on the Horizon
Grocery margins are set to improve post-completion of DFI’s exit from Singapore in 2H25F and ongoing overhead reductions in Hong Kong, especially staff and rental costs.
DFI’s Singapore Food business, which broke even in FY24, is scheduled for divestment, supporting margin expansion.
Hong Kong supermarkets benefit from expanded fresh offerings, leveraging a partnership with China’s DingDong to boost product SKUs from 6 (Apr 25) to over 150 by year-end.
Wellcome outlets report increased footfall in fresh aisles, which now occupy 20-30% of store space.
Convenience Stores & Other Segments: Stable Outlook
Convenience store margins are forecast to stabilise with ongoing network growth.
Home furnishings and other segments maintain steady contributions.
| Segment |
FY24 Revenue (US\$m) |
FY25F Revenue (US\$m) |
FY26F Revenue (US\$m) |
FY27F Revenue (US\$m) |
FY25F EBIT Margin (%) |
FY26F EBIT Margin (%) |
| Grocery Retail |
3,130.6 |
3,043.2 |
2,441.6 |
2,486.8 |
1.9 |
2.2 |
| Convenience Stores |
2,378.8 |
2,380.0 |
2,408.8 |
2,447.7 |
3.9 |
4.1 |
| Health & Beauty |
2,457.3 |
2,583.9 |
2,699.8 |
2,788.5 |
8.7 |
8.8 |
| Home Furnishings |
701.2 |
666.1 |
669.5 |
672.8 |
3.0 |
3.0 |
| Others |
201.0 |
190.0 |
180.0 |
190.0 |
N/A |
N/A |
Financial Performance Overview
DFI’s revenue is projected to remain stable in FY25F at US$8.86bn, with a gradual decline in FY26F before a rebound in FY27F. Operating EBITDA margins are set to improve steadily, reaching 13.2% in FY27F, underpinned by cost reductions and strategic exits.
| Metric |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Net Revenues (US\$m) |
9,170 |
8,869 |
8,863 |
8,400 |
8,586 |
| Operating EBITDA (US\$m) |
990 |
1,037 |
1,087 |
1,065 |
1,134 |
| Net Profit (US\$m) |
32 |
(244) |
121 |
272 |
289 |
| Dividend Yield (%) |
2.5% |
3.3% |
17.5% |
3.7% |
4.0% |
| ROE (%) |
16% |
26% |
96% |
848% |
183% |
Peer Group Analysis: Asia Retail Sector Comparison
DFI is benchmarked against regional peers, highlighting its competitive position in terms of growth, valuation, and profitability.
| Company |
Ticker |
Recommendation |
Price (Lcl curr) |
Target Price |
Market Cap (US\$m) |
P/E CY25F |
P/E CY26F |
Dividend Yield (%) |
ROE (%) |
| DFI Retail Group |
DFI SP |
Add |
3.14 |
3.45 |
4,250 |
16.1 |
15.6 |
17.5% |
95.5% |
| Sheng Siong Group |
SSG SP |
Hold |
2.06 |
2.21 |
2,409 |
21.7 |
20.5 |
3.2% |
25.0% |
| Sun Art Retail Group |
6808 HK |
Add |
2.12 |
2.50 |
2,593 |
31.5 |
22.8 |
3.0% |
2.9% |
| Yonghui Superstores |
601933 CH |
Hold |
5.35 |
5.20 |
6,783 |
N/A |
186.8 |
0.0% |
-2.4% |
| MINISO Group |
9896 HK |
NR |
49.78 |
N/A |
7,776 |
20.6 |
16.2 |
2.6% |
24.2% |
| Sa Sa Int’l Holdings |
178 HK |
NR |
0.62 |
N/A |
243 |
24.8 |
14.0 |
5.2% |
9.5% |
| Chow Tai Fook |
1929 HK |
NR |
14.70 |
N/A |
18,248 |
24.8 |
16.5 |
4.4% |
27.7% |
ESG Commitment and Strategic Transformation
DFI Retail Group is executing a multi-year transformation plan under CEO Scott Price’s “Customer First, People Led, Shareholder Driven” framework. Key ESG targets include:
- Halving carbon emissions by 2030 (from a 2021 baseline) and achieving net-zero (Scopes 1 & 2) by 2050.
- Annual investments of US\$15m-20m over 2025-27F to support emissions reduction.
- Improved ESG disclosures, with Scope 1 and 2 emissions falling 2% YoY in 2024 and energy consumption down 3% YoY.
DFI currently holds an LSEG ESG combined grade of C+. No premium or discount is applied for ESG in current valuations, but improvements in disclosure and execution could positively influence investor perception.
DFI Retail Group: Strategic and Financial Catalysts Ahead
The group’s cost optimisation and debt paydown are driving improved margin profiles.
An investor day in 4Q25F may provide clarity on near-term financial targets and strategic direction.
Potential re-rating catalysts include a quicker recovery in Hong Kong sales and stronger-than-expected margin uplift from cost optimisation.
Downside risks remain: slow Hong Kong recovery or intensified competition could pressure margins.
DFI Retail Group: By The Numbers
| Metric |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Cash & Equivalents (US\$m) |
303 |
274 |
182 |
289 |
414 |
| Net Cash Per Share (US\$) |
-0.46 |
-0.35 |
0.03 |
0.11 |
0.20 |
| BVPS (US\$) |
0.73 |
0.43 |
-0.02 |
0.07 |
0.17 |
| Gross Interest Cover |
1.07 |
1.28 |
2.80 |
3.41 |
3.65 |
| Operating EBITDA Margin (%) |
10.8 |
11.7 |
12.3 |
12.7 |
13.2 |
DFI Retail Group: Shareholder Structure and Ratings
- Jardine Matheson Holdings: 77.6%
- Aberdeen Asset Managers: 3.4%
- First Sentier Investors (Hong Kong): 1.8%
- Free Float: 22.2%
Stock Rating Framework
- Add: Total return expected to exceed 10% over the next 12 months.
- Hold: Total return between 0% and positive 10%.
- Reduce: Total return to fall below 0%.
Conclusion: DFI Retail Group Positioned for Recovery and Growth
DFI Retail Group is executing a robust turnaround strategy, focusing on cost optimisation, store rationalisation, and fresh product offerings, especially in Hong Kong and Southeast Asia. The company’s transformation plan, supported by disciplined ESG investments and improved financial health, sets the stage for margin expansion and shareholder value creation. Sector comparisons underscore DFI’s competitive profile, with clear opportunities for re-rating as operational improvements are realised. Investors and analysts should monitor upcoming strategic updates and sector developments for potential upside.
