While Dairy Farm is still growing its revenue, it is doing so at a much slower pace. In addition, the firm’s also struggling with declining profit margins. In 2011, Dairy Farm’s top-line grew by 14.6% and it had a 5.3% net profit margin; by the first half of 2014, the supermarket retailer’s revenue growth and net profit margin were at 4.2% and 4.8% respectively.
Currency risks also provide headwinds that Dairy Farm has to struggle against. The experience of the firm’s Indonesian unit is a good example. Over the past five years, the Singapore dollar has appreciated by more than 40% against the Indonesian rupiah; even if profits from Dairy Farm’s Indonesian business had stayed stagnant, a conversion into Singapore dollars would mean that those profits would be less valuable due to the currency swings.
The growing tide in e-commerce (especially in the fast-moving consumer goods space) may also be an obstacle for Dairy Farm as more and more shopping is done online instead of in traditional brick-and-mortar stores.
Dairy Farm's FY14 profit edges up 2%
5 Mar 2015
RETAIL group Dairy Farm posted a 2 per cent rise year on year in net profit to US$509 million while sales were up 6 per cent at around US$11 billion.
Underlying profit increased 4 per cent to US$500 million, while underlying earnings per share were 36.98 US cents, up from 35.52 US cents previously. Basic earnings per share were 37.65 US cents, from 37.05 US cents.
Including associates and joint ventures, sales climbed 5 per cent to US$13.1 billion, the firm said in its preliminary announcement of results for the year ended Dec 31, 2014.
Dividends per share came to 23 US cents, comparable to the previous financial year.
Dairy Farm said: "Trading conditions in some of the group's major markets are expected to remain challenging, especially for the food businesses in South-east Asia. The group's approach, however, is to drive sales and profit growth in ways that build long-term value."
"To that end, the group continues to invest in new and existing stores, strengthen its brands, improve operations and enhance the shopper experience across all formats."
The significant difference bet. price crashing down on low vol. and price crashing down on high vol.
Sometimes, certain things could only be visible on the chart when the share price starts its unusual / volatile movement (up or down all in a row, with or without volume). Bollinger bands are very powerful technical indicator. When using it as a key indicator, volume is not necessarily required, instead, the breakout (upside or downside) at the upper or lower Bollinger band is more important. Likewise, in a downtrend, volume is not required for a downside breakout at support level. However, in an uptrend, volume is necessary for an upside breakout at resistance level. Note: A price drop (or rise) on high volume all in a row is a stronger signal indicating that something in the stock has fundamentally changed.
"To bottom fish, one has to read the supply and demand of the stock correctly. I will certainly not be buying any stocks where a major shareholder is liquidating his positions. Yes, it is not easy to read market volume but I feel that all investors (fundamental investors included) must learn this art of deciphering market volume and then making a decision whether the selling volume is temporary or more permanent." ~ oldman
In my book, the first chapter is intentionally, Demand & Supply. One must master this to master the stock market.
As for FA, we cannot trust this totally. Let's assume that a stock is trading at 30cts and it has cash of $1 with no debt. This will definitely be termed as a "good FA" stock. But, instead of using the cash smartly, management decides to buy grossly overvalued companies with it. As management is usually smart, you have to read in between the lines. Then, instead of having $1 worth of cash, the company ends up with stakes in these overvalued companies and now has a debt of $1 per share.
Your 'good FA' stock is now a 'bad FA' stock. At the end of the day, before we can invest based on FA, we have to trust the management. But, how does one assess management in order to know if one can trust them? I don't have the answers to this and hence, I rather invest in top entrepreneurs who are already financially wealthy as I think that their self esteem will be more important to them than just adding a few more millions into their bank accounts.
When you are very wealthy, money will mean less and less to you. What is more meaningful is your ability to grow other businesses. These folks will get a high when they successfully build up other businesses. One just have to believe in them and ride the journey with them.
Wheelock Properties falls under this scenario, the management didn't use its huge cash hoard smartly...
Dairy Farm International kept at 'buy' with $7.03 price target
By Benjamin Tan March 7, 2016 : 12:49 PM MYT
Retailer Dairy Farm International’s FY2015 were within DBS Vickers’ expectations even though overall performance was lacklustre.The broker does not foresee changes to its forecasts.
Revenue was supported by North Asia, but this was offset by decline in sales in East Asia (Malaysia, Indonesia, Vietnam and Brunei), dragged by Malaysia’s weak consumption and currency.
The broker notes that the firm’s balance sheet is now in net debt position of US$482 million ($662 million) on financing raised for the Yonghui acquisition versus net cash of US$475 million in FY14.
The company is expected to continue to invest in new and existing stores, strengthen its brands, improve operations and enhance shopper experience across all formats. These initiatives, DBS Vickers says, will incur costs. That said, investors can take comfort from the US$700 million cash generating capability funded by its suppliers.
Dairy Farm’s dividend payout was in line with the 59-69% range between FY09 and FY14.
At current valuation of 19x FY16F PE, the broker feels valuations are attractive. It is below Asean grocery retail peers, which are trading at an average of 23-25x.
DBS Vickers maintains a “buy” on the stock, with a price target of $7.03 (down from $7.34 previously).