Dairy Farm's core earnings up 6% to US$480m on lower opex

Slightly ahead of market's forecast.

According to DBS, Dairy Farm's FY13’s core earnings of US$480m (+6% y-o-y) was slightly ahead of its expectations due to lower than expected opex.

Here's more:

Otherwise, revenue and gross margins were in line with expectations. FY13 earnings were driven by store expansion and generally better SSSG. While underlying profit in the Food Business declined, Health & Beauty, Home Furnishing and Restaurant segments reported record profits.

Balance sheet improved with a stronger net cash position at US$638m. Final DPS of 16.50 UScents was declared, bringing total DPS for FY13 to 23 UScents.

Growth focused on attractive markets in Asia.
Management continues to be Asia-focused, and will expand to attractive markets and business segments while seeking to attain better operating efficiencies.

Going forward, we believe it will increase store count mainly in Indonesia and China. It will also invest in IT systems to enhance efficiencies.

FY14F earnings is revised by +14%. We lift EBIT margins from 4.4% to 5.1% as our opex and margin estimates were conservative previously. We now expect pre-exceptional earnings to grow at 9% this year, largely driven by store expansion, SSSG and margin expansion on better sales mix.