Analysts stay positive on Delfi Limited in lieu of strong showings for 2HFY2021 ended December, topped with cost discipline, as a leading chocolate confectionery player in Asean’s largest economy.
DBS Group Research analyst Woon Bing Yong has maintained a “buy” rating on Delfi with an increased target price to $1.10 from $1.07.
According to Wong, Delfi’s 2HFY2021 core PATMI – or earnings – beat expectations, soaring approximately 110% y-o-y to US$14.0 million ($18.9 million). “Delfi’s valuation is attractive, at 12.1x FY2022 P/E (below -1 s.d. of its four-year historical mean),” he says. “Following the group’s special dividend announcement, we see Delfi as a potential dividend play, offering between a 4%-5% yield based on current prices.”
See: Delfi announces 67.5% rise in Patmi, special dividend
In addition, Delfi has launched two new healthier products as well as refreshed products under its SilverQueen brand. These efforts target Gen Z and Millennials in Indonesia and could also enable Delfi to premiumise and capitalise on Indonesia’s increasingly health-conscious population, says the analyst.
CGS-CIMB analysts Tay Wee Kuang and Izabella Tan have maintained their “add" rating on Delfi, increasing its target price to $1.09 from $1.02.
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“FY2021 core net profit of US$25.9 million was supported by general sales recovery across its operating markets (i.e. Indonesia, Philippines, Singapore and Malaysia), and continued cost discipline in 2HFY2021,” say the analysts. “FY2021 revenue came in at 97%/99% of our/consensus’ estimates as sales recovered q-o-q in 4QFY2021 due to the reopening of Indonesia and seasonality factors.”
Moreover, 2HFY2021 gross profit margins (GPM) improved 3.3 percentage points y-o-y, despite cost pressures from high raw material and transportation costs, exhibiting Delfi’s success in its cost control measures through hedging, according to the analysts. “Better sales momentum also translated to improved operating leverage, with lower selling and distribution expenses per revenue dollar,” say Tay and Tan.
Delfi also proposed a special dividend per share (DPS) of 0.48 US cents per share alongside a final DPS of 1.08 US cents, bringing total FY2021 DPS to 2.83 US cents, according to Tan and Tay. “Delfi’s healthy and growing cash balance of US$86.2 million, even after paying down US$39.3 million in borrowings, as at end-FY2021 is supportive of core dividends of 2.35 US cents per annum and could potentially pave the way for more special dividends in the future, especially as the company deliberates timing of expansionary capex while operating with a low maintenance capex of approximately US$4 million- US$6 million per annum.”
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“Core dividends provide a respectable dividend yield of approximately 4%,” they add.
Despite rising Covid-19 cases within its operating markets, governments have remained steadfast in re-instating social mobility domestically. This will benefit Delfi, say the analysts, especially as consumption patterns return to pre-Covid-19 levels.
According to the analysts, Delfi will continue executing its business strategy to rejuvenate its portfolio, such as further launches of its ‘Better-for-You’ product lines to capture a wider consumer base, while deepening relationships with channel partners to ensure product availability across sales channels.
At 2:44pm, shares in Delfi are trading at 1.5 cents higher or 1.94% up at 79 cents.
