24-09-2024, 01:08 PM
You basically need a lot of moving parts to get it right. DFI is not just a case of divesting one poor-performing asset to turnaround.
- Consolidated groceries at an operating profit of less than $50 million, a far cry from the $150-200 million in the past. Yonghui is at the associate level so the losses removal is irrelevant here.
- Convenience stores already close to pre-pandemic profits of about $90 million so not more low-hanging fruit left but a function of future outlet growth
- Health & Beauty is close to pre-pandemic at $210 million but good days were able to earn close to $300 million (2018 & 2019). The question is whether today's or tomorrow's market conditions resemble 2018/19.
- Home Furnishing probably has the biggest lever for turnaround. In addition, they have been growing home furnishing (more than doubled store count in HK & ID but not sure in floor space; incremental stores in ID are smaller in size)
- On associates, Maxim's also recovered back to 2023 levels while Yonghui divestment will see loss removal of $48 million.
My very rough guess-estimate is that core earnings are around $200 million which is basing on 2023 core adjusted for one-offs and Yonghui loss removal. This is at around 14x earnings which is not exactly screaming buy especially Big Toe's comment on the management's quality. I guess it will be cheap if they hit a home run on groceries AND home furnishing.
- Consolidated groceries at an operating profit of less than $50 million, a far cry from the $150-200 million in the past. Yonghui is at the associate level so the losses removal is irrelevant here.
- Convenience stores already close to pre-pandemic profits of about $90 million so not more low-hanging fruit left but a function of future outlet growth
- Health & Beauty is close to pre-pandemic at $210 million but good days were able to earn close to $300 million (2018 & 2019). The question is whether today's or tomorrow's market conditions resemble 2018/19.
- Home Furnishing probably has the biggest lever for turnaround. In addition, they have been growing home furnishing (more than doubled store count in HK & ID but not sure in floor space; incremental stores in ID are smaller in size)
- On associates, Maxim's also recovered back to 2023 levels while Yonghui divestment will see loss removal of $48 million.
My very rough guess-estimate is that core earnings are around $200 million which is basing on 2023 core adjusted for one-offs and Yonghui loss removal. This is at around 14x earnings which is not exactly screaming buy especially Big Toe's comment on the management's quality. I guess it will be cheap if they hit a home run on groceries AND home furnishing.
"Criticism is the fertilizer of learning." - Sir John Templeton