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
| Year |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue (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) |
32.2 |
(244.5) |
120.7 |
272.1 |
289.2 |
| Core EPS (US\$) |
0.11 |
0.15 |
0.20 |
0.20 |
0.21 |
| Core EPS Growth |
434% |
30% |
31% |
3% |
6% |
| DPS (US\$) |
0.08 |
0.11 |
0.55 |
0.12 |
0.13 |
| Dividend Yield |
2.3% |
3.0% |
15.9% |
3.3% |
3.6% |
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
| Company |
Ticker |
Current Price |
Target Price |
Market Cap (US\$m) |
P/E (CY25F) |
P/E (CY26F) |
2-yr EPS CAGR |
P/BV (CY25F) |
ROE (CY25F) |
Dividend Yield (CY25F) |
| DFI Retail Group |
DFI SP |
3.45 |
3.86 |
4,670 |
17.6 |
16.8 |
17.3% |
8.09 |
45.6% |
3.3% |
| Sheng Siong Group |
SSG SP |
1.84 |
1.90 |
2,136 |
19.4 |
18.3 |
6.1% |
4.79 |
25.1% |
3.6% |
| Sun Art Retail Group |
6808 HK |
1.94 |
2.30 |
2,367 |
40.6 |
23.0 |
na |
0.78 |
1.9% |
1.0% |
| Yonghui Superstores |
601933 CH |
5.34 |
5.80 |
6,719 |
66.1 |
52.9 |
na |
9.40 |
14.3% |
0.0% |
| MINISO Group Holding Ltd |
9896 HK |
34.05 |
na |
5,390 |
14.2 |
11.3 |
na |
3.69 |
23.3% |
3.4% |
| Sa Sa International Holdings |
178 HK |
0.66 |
na |
261 |
26.4 |
14.9 |
10.1% |
na |
9.5% |
4.8% |
| Chow Tai Fook Jewellery Group |
1929 HK |
14.00 |
na |
17,594 |
23.6 |
15.8 |
20.9% |
4.92 |
27.4% |
4.5% |
| Cafe de Coral Holdings Ltd |
341 HK |
7.63 |
na |
564 |
18.6 |
17.2 |
-0.8% |
1.55 |
8.5% |
5.2% |
| China Tourism Group Duty Free |
1880 HK |
58.40 |
na |
18,671 |
22.8 |
19.7 |
13.8% |
1.92 |
8.9% |
2.2% |
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.
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