CGS International Securities
July 23, 2025
DFI Retail Group Delivers Robust 1H25 Performance and Announces Generous Special Dividend: In-Depth Financial Review and Sector Comparison
Executive Summary: Special Dividend Lifts DFI Retail Group’s Investment Appeal
DFI Retail Group showcased a strong financial performance for the first half of 2025, with underlying PATMI surging 39% year-on-year. The surprise announcement of a special dividend has propelled the forecasted FY25 dividend yield to an impressive 16%, drawing investor attention. Amid significant portfolio monetization, strategic divestments, and a sharpened focus on Health & Beauty (H&B), DFI is positioning itself for sustained profitability, despite headwinds in food and convenience segments. This report delivers a comprehensive breakdown of DFI’s financials, segment performance, peer comparisons, and outlook.
1. DFI Retail Group: 1H25 Financial Highlights and Strategic Developments
- 1H25 Underlying PATMI: US\$105 million (+39% YoY), representing 40%/42% of full-year forecasts.
- Special Dividend: 44.3 US cents per share, bringing FY25F DPS to 54.8 US cents and an enticing 16% yield.
- Revenue: US\$4.4 billion (flat YoY), with seasonally stronger 2H expected.
- Associates Contribution: US\$30.5 million in 1H25, up from US\$3 million in 1H24, driven by Maxim’s and Robinsons Retail and absence of Yonghui losses.
- Operating Margin: Improved by 20 basis points YoY to 4.0%.
Special Dividend: Signal of Limited Reinvestment
– Monetization of US\$900 million in portfolio assets in 1H25, with an additional US\$93 million expected in 2H25 from the sale of the Singapore grocery business. – Special dividend indicates minimal reinvestment at this stage. – Capex guidance retained at US\$200–220 million for FY25, targeting cost optimization, store revamps, and network expansion. – Total interim and special dividend payout of US\$647 million exceeds the US\$537 million cash balance as of 1H25, but management is confident of closing FY25 in a net cash position due to expected working capital improvements.
Revised Guidance and Upside Catalysts
– FY25F profit guidance streamlined to US\$250–270 million, aligning with analyst expectations. – Reduced organic revenue growth forecast to 0.5–1% (previously +2%) amidst divestment of Cold Storage and a weaker revenue outlook. – Revenue forecasts for FY25F–27F trimmed by 2–9%, but a 16% EPS CAGR expected for FY24–26F on rising net margins. – Target price raised to US\$3.86, based on 17x 2026F P/E (1 standard deviation above the 5-year mean), factoring in a stronger balance sheet and the special dividend.
2. Segment-Wise Performance: Growth Engines and Challenges
Food (Grocery Retail)
– 1H25 revenue: US\$1.5 billion (flat HoH, -2% YoY). – EBIT: US\$24 million (-24% HoH, -5% YoY); EBIT margin stable at 1.6%. – DFI has pivoted toward price competitiveness and value offerings in Hong Kong, achieving increased customer footfall but facing overall downtrading and spending shifts to neighboring Chinese cities. – Partnership with DingDong to expand fresh product offerings and attract wet market customers.
Convenience Stores
– 1H25 revenue: US\$1.1 billion (-7% HoH, -3% YoY), impacted by lower cigarette sales in Hong Kong. – EBIT: US\$38 million (-32% HoH, -19% YoY); EBIT margin at 3.4% (-0.6 pts YoY). – Hong Kong saw sales recovery in 2Q25 post-annualization of cigarette tax and growth in ready-to-eat products. – Singapore experienced weaker YoY sales due to lower tourist traffic, while South China store expansion (119 new outlets) faced fierce online competition.
Health & Beauty (H&B)
– 1H25 revenue: US\$1.3 billion (+4% HoH, +7% YoY). – LFL sales up 4% YoY, driven by Hong Kong and Southeast Asia. – EBIT: US\$109 million (+1% HoH, +6% YoY); EBIT margin at 8.4% (-0.1 pts YoY). – Strong performance from wellness and derma skincare categories; expanded Guardian stores in SEA and piloting franchisee models for asset-light expansion in Indonesia.
Home Furnishings
– 1H25 revenue: US\$328 million (-7% HoH, -6% YoY). – EBIT: US\$9 million (1H24: US\$3 million); EBIT margin at 2.6% (+1.7 pts YoY). – Hong Kong and Indonesia remain challenging while Taiwan held steady.
Associates
– Underlying associates’ contribution soared to US\$31 million in 1H25 (1H24: US\$3 million), led by Maxim’s (+75% YoY underlying profit) and Robinsons Retail (more than doubled contribution before divestment in May 2025). – Divestment of Yonghui (Feb 2025) removed a loss-making associate from the portfolio.
3. Key Financial Tables: DFI Retail Group
| Financial Summary (US\$m) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue |
9,170 |
8,869 |
8,863 |
8,400 |
8,586 |
| Operating EBITDA |
990 |
1,037 |
1,087 |
1,065 |
1,134 |
| Net Profit |
32 |
(245) |
121 |
272 |
289 |
| Core EPS (US\$) |
0.11 |
0.15 |
0.20 |
0.20 |
0.21 |
| Core EPS Growth |
434% |
30% |
31% |
3% |
6% |
| FD Core P/E (x) |
30.0 |
23.1 |
17.7 |
17.1 |
16.1 |
| DPS (US\$) |
0.08 |
0.11 |
0.55 |
0.12 |
0.13 |
| Dividend Yield |
2.3% |
3.0% |
15.9% |
3.3% |
3.6% |
| Net Gearing |
63% |
79% |
311% |
(122%) |
(107%) |
4. Peer Comparison: Global and Regional Retailers
| Company |
Ticker |
Rec. |
Price (lcl) |
Target Price (lcl) |
Market Cap (US\$m) |
P/E CY25F |
P/E CY26F |
2-year EPS CAGR (%) |
P/BV (x) CY25F |
ROE (%) CY25F |
Dividend Yield (%) CY25F |
| DFI Retail Group |
DFI SP |
Add |
3.45 |
3.86 |
4,670 |
17.6 |
16.8 |
17.3% |
8.09 |
45.6% |
3.3% |
| Sheng Siong Group |
SSG SP |
Add |
1.84 |
1.90 |
2,136 |
19.4 |
18.3 |
6.1% |
4.79 |
25.1% |
3.6% |
| Sun Art Retail Group |
6808 HK |
Add |
1.94 |
2.30 |
2,367 |
40.6 |
23.0 |
n/a |
0.78 |
1.9% |
1.0% |
| Yonghui Superstores |
601933 CH |
Hold |
5.34 |
5.80 |
6,719 |
66.1 |
52.9 |
n/a |
9.40 |
14.3% |
0.0% |
| MINISO Group |
9896 HK |
NR |
34.05 |
n/a |
5,390 |
14.2 |
11.3 |
n/a |
3.69 |
23.3% |
3.4% |
| Sa Sa International Holdings |
178 HK |
NR |
0.66 |
n/a |
261 |
26.4 |
14.9 |
10.1% |
n/a |
9.5% |
4.8% |
| Chow Tai Fook Jewellery Group |
1929 HK |
NR |
14.00 |
n/a |
17,594 |
23.6 |
15.8 |
20.9% |
4.92 |
27.4% |
4.5% |
| Cafe de Coral Holdings |
341 HK |
NR |
7.63 |
n/a |
564 |
18.6 |
17.2 |
-0.8% |
1.55 |
8.5% |
5.2% |
Sector averages for Singapore, Hong Kong/China, Malaysia, Indonesia, the Philippines, and Thailand are provided, with DFI Retail Group’s metrics remaining competitive, notably on ROE and dividend yield.
5. ESG and Transformation: Progress and Commitments
– DFI Retail Group is executing a multi-year transformation plan, aiming to enhance customer and employee experience, optimize its supply chain, reduce food waste, and address climate change. – The company has committed to halving carbon emissions by 2030 (from a 2021 baseline) and achieving net-zero greenhouse gas emissions (Scopes 1 and 2) by 2050. Scope 3 reduction plans are in development. – Annual investments of US\$15–20 million are allocated for emissions reduction initiatives between 2025 and 2027. – ESG disclosures have improved since 2022/2023, with measured progress in environmental and community areas.
6. Outlook and Investment Summary
– DFI Retail Group’s strategy of portfolio optimization, cost control, and focus on high-margin segments positions it well for continued earnings growth. – The special dividend, while signaling limited immediate reinvestment, offers an attractive near-term yield. – Key catalysts include the upcoming Investor Day (expected 4Q25) for clarity on strategic direction and potential monetization plans. – Risks include slow sales recovery in Hong Kong and cost pressures.
7. Price Performance and Shareholder Profile
- 1M / 3M / 12M Price Performance (%): 32.2 / 40.8 / 91.7 (absolute), 25.0 / 28.4 / 58.0 (relative)
- Major Shareholders:
- Jardine Matheson Holdings: 77.6%
- Aberdeen Asset Managers: 3.4%
- First Sentier Investors (Hong Kong): 1.8%
Conclusion
DFI Retail Group’s decisive actions in portfolio management, its strong showing in Health & Beauty, and the payout of a substantial special dividend underscore the group’s commitment to shareholder value. While certain segments face headwinds, continued transformation, robust cash generation, and a focus on core profitability keep DFI Retail Group firmly on the radar of institutional and retail investors alike. The next major catalyst—the Investor Day in 4Q25—will be critical for unveiling the group’s medium-term strategy and growth ambitions.
