Dairy Farm International Holdings Ltd (D01)

Source: DFIHL website

As promised, here's my view on Dairy Farm International Holdings Ltd ("DFIHL"). Which I am  doing because I said I will, although I am sure nobody is going to hold it against me if I don't. I will be doing a comparison between Sheng Siong Group Ltd ("SSGL") food business against DFIHL in Singapore since that's the only thing they have in common. Later on, I'll take a look at DFIHL on it own to see what it has going for it.

If we were to compare SSGL and DFIHL it is clear that industry competition is intense and market conditions are less than ideal. That could be why Shop N Save stores were rebranded to Giant as the latter has a stronger brand awareness and the former has nothing special going for it. Cold Storage has been doing well given it's more premium branding and wider array of product offerings.

I do however think that they need to re look at their self service counters at Cold Storage. A much more efficient and smarter system would be the one that Sainsbury in London is using. From a consumer standpoint, it seems Prime, Giant, SSGL and NTUC are pretty much the same with not many differentiating factors. For such mass market segments, I can only imagine that cost and convenience are the uppermost factors in a shopper's mind. Although I do hear that NTUC Finest is challenging Cold Storage's stranglehold on the upmarket segment, they have yet to cause any serious damage.

If we were to look at DFIHL on its own, results are mixed which is not surprising given that they are in multiple countries, and with revenue streams from four different business segments, namely Food, Health and Beauty, Home Furnishings and Restaurants. But the relevation that there was a write off of prior years' Malaysia's supplier income of US$58.6 million was a major sticking point for me. They have added a net 212 stores (2012: 278 stores) across its business segments, with the majority coming from Health and Beauty and Restaurants. I wonder whether growth is slowing down and if it's wise to use expansion as a way to corner the market and force out the weaker competition.

They have been shopping around and picked up a 49% stake in Rose Pharmacy Inc, which is a Cebu based pharmacy retailer and as of end 2013 has 238 outlets across the country. This is their first foray into the Health and Beauty sector in the Philippines but they are not new to the country since they own supermarkets under the brands Shopwise, Rustan and Wellcome.

They also acquired a 19.99% minority stake in Yonghui Superstores Co. Ltd which gave them the right to nominate 2 directors to the board and 1 member to its supervisory board after regulatory approval has been received for the transaction. Apparently they, like many others before them, have been trying to get a slice of the huge pie called China and while they may be late in the game, they may not end up last. How this will play out, I'm not sure but hearsay from Chinese natives residing in Singapore is not music to one's ears.

The daily volume traded seems rather thin and this would probably be one of those stocks you buy for its dividends rather than capital gains. I am on the fence on this stock and am unlikely to go in anytime soon.

P.S. Sorry about the malfunctioning of the comments tool on my blog, truth be told I didn't even realized it's not working until a reader told me! I fixed it somehow for the later posts as the earlier posts had some weird Google+ stuff going on. 


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