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Why Are Duty Free International Ltd’s Shares Near A 52-Week High Now?

Singapore’s stock market, as represented by the Straits Times Index ETF (SGX: ES3), is more or less flat over the last 12 months, inching up by just 2.4%.

But, not every stock in the market has been anaemic. One company with a strong return over the past year is Duty Free International Ltd  (SGX: 5SO). At its closing price of S$0.44 yesterday, Duty Free International’s stock price is 49% higher from where it was on 28 September 2015 and just a whisker away from a 52-week high of S$0.45.

What could have contributed to the rise in the company’s share price over the past year? Before we take a look at some possible reasons, let’s first have a quick background on the company.

Duty Free International has been in business for over 30 years. It is the largest local duty-free retailing group in Malaysia with 36 outlets comprising 34 duty-free retail outlets and two duty paid perfume and cosmetics outlets. The company’s retail outlets are located in leading entry and exit points in Malaysia such as airports, seaports, border towns, and popular tourist destinations.

Duty Free International also owns the Black Forest Golf and Country Club and an oil palm plantation.

With that, let’s dig into some of the possible reasons behind the company’s strong share price gains over the past year:

1. Augmenting its investors’ profile

In July and August, Duty Free International had issued 50 million new shares of itself in private placements to institutional investors such as Great Eastern Life Assurance (Malaysia) Berhad and Affin Hwang Asset Management Berhad. For perspective, the company had a weighted average count of 1.129 billion shares as of 31 May 2016.

Duty Free’s stock price may have benefitted from increased awareness by institutional investors and the general investing community. Singapore-based stock brokerage firm UOB-Kay Hian had also recently initiated coverage on Duty Free International with a ‘Buy’ rating.

2. Strategic Partnership with Gebr. Heinemann

On 18 March 2016, Duty Free International and Gebr. Heinemann announced a joint venture.

Gebr. Heinemann is a family-run business and it is a major distributor and retailer in the international travel retail market.

The company’s distribution business has over 1,000 customers in more than 100 countries. Its retail operations have more than 300 stores located in 78 airports in 28 countries as well as border crossings and cruise liners.  Gebr. Heinemann’s retail operations generated annual revenue of €2.4 billion in 2014 and serves over 40 milion customers annually.

The joint venture will over time “offer to Malaysians and visitors to Malaysia, an enhanced travel retail experience on par with the best available in the world.”

At Duty Free International’s closing share price of S$0.44 yesterday, it has a trailing price-to-earnings (P/E) ratio of 21.6. For perspective, the SPDR STI ETF (SGX: ES3) has a P/E of 12 at the moment.

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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 James Yeo doesn’t own shares in any companies mentioned.