8 Quick Things Investors Should Learn About Dairy Farm International Holdings Ltd

Dairy Farm International Holdings Ltd (SGX: D01) had just started sharing its earnings presentations through webcasts (the link is here), joining a group of cool companies.

In Singapore, Dairy Farm is the owner of stores such as Guardian, Cold Storage, Giant Hypermarket, and 7-Eleven in Singapore. Including our shores, the company boasts more than 6,100 retail outlets in 12 territories around Asia. This includes stakes in outlets such as Maxim, Mannings, and even the popular Swedish furniture store IKEA.

You can read more about Dairy Farm International Holdings Ltd in here and here.

Sprawling empire

Below are eight useful (additional) things I learned from listening to Dairy Farm’s fourth quarter webcast:

  1. Chief Executive Officer Graham Allan spent time to stress that Dairy Farm is committed to building powerful retail brands that are consumer-centric. The company sees itself as a consumer driven retailer, and not a supply driven retailer.
  2. Beyond that, Allan also talked about Dairy Farms’ focus on the quality of growth (not just quantity), and the belief that the company is still a “small player” in the overall Asian retail market. He also pointed towards Vietnam as a country where less than 10% of retail is in the modern grocery retail format. Additionally, Dairy Farm’s market share of the $800 billion China modern grocery retail market is only 1% (inclusive of the firm’s recent investment into China-based supermarket outfit Yonghui Superstores). In other words, there is still a long runway of growth for Dairy Farm.
  3. Speaking on the supermarket and hypermarket segment, Allan highlighted Dairy Farm’s focus on bringing fresh food processing capabilities from Hong Kong to Singapore and Malaysia. Dairy Farm is also looking to leverage on its scale to bring its corporate branded products to all its retail brands in Asia. Currently, the private label brands make up “well below 10%” of Dairy Farm’s Food and Health & Beauty segments’ sales.
  4. Moving on to the convenience store side, Dairy Farm recognizes the decline in traditional convenience store staples of tobacco and media (think magazines). The company will be looking to replace those categories with big ready-to-eat meals.
  5. On the Health & Beauty side, Allan was encouraged by the progress of its Mannings stores in China even though it is still unprofitable. He felt that it was a reflection of the improved assortment of products and the better connection that the store is making with its customers. For this segment, Dairy Farm sees its real strength to be in health products and will be looking to own that market.
  6. Shifting to the Home Furnishings segment, IKEA stores were the standout performer for the financial year 2014. The Home Furnishing segment benefited from the first full year of contribution from the Taichung IKEA store and a couple of months from a new IKEA outlet in Jakarta, Indonesia.
  7. For its associate, Maxim (or its restaurant segment), Dairy Farm has secured the franchise rights for the Cheesecake Factory. Maxim has the rights for Starbucks stores in Vietnam and Cambodia and will be looking to continue its expansion in Vietnam.
  8. On an additional note on Dairy Farm’s investment in YongHui, Allan commented that YongHui is the only pure Chinese player in China’s fresh grocery market, with up to 40% of its sales coming from fresh produce. There may be common areas like the expansion of its private label programs and the procurement expertise of fresh produce in China that Dairy Farm can benefit from.

Foolish takeaway

To buy and hold a company’s shares for the long term also means keeping up with developments in the company.

The access to management teams via webcasts gives the Foolish investor a fair chance to judge for themselves whether they would like to be invested alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Dairy Farm and Starbucks