7 Key Things To Know About Dairy Farm International Holdings Limited

Dairy Farm International Holdings Limited is a regional retail giant in Asia which operates a number of brands such as Cold Storage, 7-Eleven, Giant and Guardian. It also has a 50% interest in Maxim’s, Hong Kong’s leading restaurant chain. It owns more than 6,500 outlets and employs over 180,000 staff across the region. Dairy Farm is a member of the Jardine Matheson Group, a US$ 47 billion dollar market cap company and one of the largest conglomerate listed on Singapore Exchange. Dairy Farm has a standard listing on the London Stock Exchange as its primary listing, with secondary listings in Bermuda and Singapore.

Stock Information

Ticker Symbol: SGX:D01

Market Cap: US$ 10.8 billion (9/3/2018)

Share Price: US$ 8.09 (9/3/2018)

Sector: Consumer Defensive

Industry: Grocery Stores

The Business

The year 2016 marks the 130th anniversary of Dairy Farm. Over the past 13 decades, Dairy Farm has grown to become a pioneer in Asian retail – operating supermarkets, hypermarkets, convenience stores, health and beauty stores and home furnishings stores under well-known brands. Dairy Farm operates across 11 Asian countries and territories, namely China, Taiwan, Hong Kong, Macau, Vietnam, Cambodia, The Philippines, Malaysia, Singapore, Brunei and Indonesia.

Supermarkets, Hypermarkets and Convenience Stores

Dairy Farm operates supermarkets, hypermarkets and convenience stores with 20 retail brands across the region. In 2016, this division contributed 70% of the company’s total sales and thus, is the largest income contributor to the overall group. Supermarkets and hypermarkets contributed 56% while convenience stores contributed another 14%.

Under supermarkets and hypermarkets division, Dairy Farm company aims to improve quality control and cost by expanding its direct sourcing. It is continuously looking for opportunities to partner and work with local business.

Under convenience stores segment, Dairy Farm operates 7-Eleven in Hong Kong, Macau, China and Singapore. The company strives to improve earnings in this segment by providing Ready-to-Eat (RTE) food offerings to customers. In fact, RTE food offerings continued to improve with over 10% year-on-year sales growth across the company.

Dairy Farm completed its disposal of Starmart Chain in Indonesia during FY 2016.

Source: Dairy Farm International Holdings Limited Annual Report 2016

Health and Beauty

Dairy Farm operates health and beauty business through well-established brands, such as Mannings, Guardian, Rose Pharmacy and GNC. 19% of Dairy Farm’s total sales were contributed by health and beauty division in 2016.

In 2016, the division closed down a number of 100 stores, from 1,815 in 2015 to 1,715 in 2016, due to underperforming.

Home Furnishing

Dairy Farm operates home furnishing business under IKEA brand in Hong Kong, Taiwan and Indonesia. The company reported 4% of total sales from this division in 2016.

Besides, it has opened a fourth IKEA store in Hong Kong in the second half of 2017 and plans to open a second IKEA store in Indonesia in the future.


In 2016, restaurants contributed 7% of the company’s total sales. Dairy Farm’s associate, Maxim’s operates in Hong Kong, Macau, China, Vietnam, Cambodia and Thailand. Maxim’s offers a diverse mix of Chinese, Asian and Western restaurants in addition to fast food, coffee outlets and cake shops.

Besides, Diary is operating over 20 Starbucks stores across Vietnam and Cambodia. In September 2016, the group entered Thailand and launched its first franchise, “mx cakes and bakery’, through a joint venture with ThaiBev.

Source: Dairy Farm International Holdings Limited Annual Report 2016

Key Opportunities

Diversified Business Across Asia

Dairy Farm’s diversified business is a kind of strength for the group. By having a wider geographical reach, Dairy Farm is able to buffer its performance during the economic slowdown in particular country. In the first half of 2017, a number of unprofitable convenience stores were closed down in Singapore. However, Dairy Farm’s convenience store operations are well performed generally as store expansion in China has offset the weaker sales in Singapore.

Joining the e-commerce bandwagon

Despite the challenging retail landscape, Dairy Farm continues to strengthen its businesses and enhance its competitive position by launching online shopping its health and beauty division and home furnishing division. Dairy Farm remains competent by trying to understand the change in consumer behaviour and leverage on an e-commerce platform. For example, Mannings, a health and beauty business in China introduced its Wechat member card and saw a 150% growth in e-commerce sales in 2016.

In Vietnam, Guardian leveraged on Facebook to update its customers on current promotions and special offers. This has led to increased in Guardian’s customer traffic and sharing of health and beauty tips with consumers. According to Viet Nam News, Vietnam is one of the world’s fastest growing e-commerce countries. The country’s e-commerce market is growing 35% per year, which is 2.5 times faster than Japan.

Key Risks

Too Big to grow

Although the management is committed to expanding its business, substantial growth in sales and profits are hard to achieve. The revenue of wholly-owned subsidiaries grew from US$ 9.8 billion in 2012 to US$ 11.2 billion in 2016, a CAGR of 3.4%. The net income grew from US$ 446.5 million in 2012 to US$ 469 million in 2016, a CAGR of merely 1.24%. Obviously, this company is not for an investor looking for growth to invest in.

As the group gets bigger and bigger, each percentage of incremental revenue represents a fundamentally larger number. In other words, the amount of new business needed to make a significant increase in earnings rises when Dairy Farm’s equity gets larger.

Source: Dairy Farm International Holdings Limited Annual Report 2016

Source: Dairy Farm International Holdings Limited Annual Report 2016

Economic Risk

Dairy Farm’s businesses are exposed to the economic risk and very sensitive to the economic environment and consumer confidence in each country. In recent years, consumer confidence in Malaysia, Singapore and Indonesia remained low, causing Dairy Farm to shut down multiple unprofitable stores. In 2016, sales from South East Asia comprised 41% of Dairy Farm’s total sales from subsidiaries. An economic uncertainty in the region might pose some economic risk to Dairy Farm in the coming year.


As at 4 March 2018, Dairy Farm is trading at a P/E of 23 and P/B of 7.45.  It has a dividend yield of 2.53%, which is quite low. However, the company is paying a stable and consistent dividend according to its track record.

Investor Relation

Dairy Farm International Holdings Limited

Jardine House,

33-35 Reid Street,

Hamilton, Bermuda

Website: http://www.dairyfarmgroup.com/en-US/Home

Email: DFGinvestor@dairy-farm.com.hk

Top Shareholders

Jardine Strategic Holdings Limited – 77.6%

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Kent Chong

Kent is an economics and finance second-year student from RMIT University. He learned investing in stock market the hard way, from studying technical chart, trading stocks from hearsay, and even bought some stocks that were recommended by stock broker. After making some losses in the market for some time, he fortunately bumped into an online value investing course and learned about value investing. Since then, he started to read about value investors like Warren Buffett, Charlie Munger and Howard Marks. He believes that value investing is a continuous learning process, like Munger once said: “Those who keep learning, will keep rising in life.”

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