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

Dairy Farm International Holdings Ltd (SGX: D01) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations (the link for Dairy Farm is here).

In Singapore, Dairy Farm is the owner of stores such as Guardian, Cold Storage, Giant Hypermarket, and 7-Eleven. As of 30 June 2015, the company, together with its associates and joint-ventures, boasts more than 6,400 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 in here and here.

Sprawling empire

Below are eight useful things I learned from listening to Dairy Farm’s webcast of its earnings presentation for the first-half of 2015:

  1. Chief Executive Officer Graham Allan described the first-half of 2015 as “difficult” despite Dairy Farm’s top-line growing at a reasonable rate of 5.5% year-on-year. The reason that’s so is because Dairy Farm’s margins and profit had suffered. Carrying on, Allan felt that Dairy Farm should look through the difficulties in the current market environment and commit to investing for the future. This commitment is reflected in the company’s investments in IT infrastructure and Chinese supermarket owner, Yonghui Superstores.
  2. Allan also said that there was good revenue growth across all segments in constant currency terms. Foreign exchange did have an impact on both the firm’s top-line and bottom-line, but he was candid in his assessment that the operating profit still fell 15% in constant currency terms.
  3. Moving on to the Supermarket and Hypermarket segment, Allan said that food costs have been experiencing deflation so sales growth has had to come from transaction growth. Dairy Farm has also launched nine category brands for its private label business thus far which grew sales 18% year-on-year. Finally, distribution centres for fresh produce were in progress for both Singapore and Malaysia – this ties in with Dairy Farm’s cooperation with Yonghui for the latter to provide procurement expertise in fresh produce.
  4. On the convenience stores side of things, Dairy Farm is continuing to focus on its ready-to-eat meals for Singapore and Hong Kong while launching branded coffee in China, Hong Kong, and Singapore. Allan felt that this segment still has a large potential in China despite already having around 750 stores in the country; he also added that he felt that the right business model is in place for China.
  5. On the Health and Beauty segment, Allan said that eight private label brands have been launched and their sales were up 41% overall. The Singapore operations in the segment is taking the lead in building an e-commerce platform. The platform currently has about 5,000 SKUs.
  6. Shifting to the Home Furnishings segment, IKEA stores under Dairy Farm were again the standout performer in the first-half of 2015. Revenue growth was encouraging across the board from Hong Kong to its new store in Indonesia. A second store is being planned for Indonesia currently and an e-commerce offer is in development.
  7. For a bit of trivia, Dairy Farm’s associate Maxim (representing the Restaurant segment) is the top mooncake company in Hong Kong for the last 17 years. Maxim has also helped open 15  Starbucks outlets in Vietnam. Maxim will also open the first franchise for the Cheesecake Factory in Disneyland Shanghai.
  8. Speaking on Dairy Farm’s investment in Yonghui, Allan commented that the Chinese company has 351 stores in China currently. Dairy Farm will be cooperating with Yonghui to obtain better access to fresh produce suppliers and in turn, share its international supply base with the Chinese hypermarket operator. Efforts will also be taken to include Mannings outlets within Yonghui.

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 International Holdings and Starbucks Corporation.