Dairy Farm shocks competitors with 149 new stores

The unexpectedly robust expansion led to an 8.3% profit rise for 2Q12.

According to CIMB, Dairy Farm’s strong network expansion in 1H was a nice surprise. Performance was driven by Hong Kong and Indonesia while health and beauty continued to be the star. "Contrary to our expectation of 163 new stores in 2012, Dairy Farm added 149 stores in 1H12, taking its network to 5,555. This compares with only two new stores in 1H11 when it consolidated its North Asia operations. It also opened eight Giant hypermarkets in 1H12 vs. five for 2011. With sites secured, we expect another eight openings in 2H."

Here's more from CIMB:

At 45% of full-year forecasts, 1H12 core earnings met our and consensus expectations. 1H contributed c.45% of full-year earnings in the past four years. We maintain our Outperform rating and target price (based on residual income method), which implies 26.3x CY13 P/E and 13.9x CY12 P/BV.

1H core earnings increased 13% yoy to US$243m on an 8% rise in revenue. Following US$289m capex (mainly for acquisitions in Cambodia and the Philippines) and a US$202m final dividend payment for FY11, net cash declined from US$466m at end-2011 to US$231m. We now raise our capex assumptions from US$300m to US$350m which compares with an average of US$241m for the past three years. Given the reversal in working capital and higher earnings, we project US$638m net cash at end-2012. The group declared an interim DPS of 6.5 US cts (+8% yoy).