The Different Ways Dairy Farm International Holdings Ltd Makes Its Money

Dairy Farm International Holdings Ltd (SGX: D01) is a bricks-and-mortar retailer that has interests in many types of retail stores that are located across Asia.

Here’s a closer look at Dairy Farm’s revenue sources. Knowing how a company makes its money is important for investors as it can give them an appreciation for the risks and opportunities associated with the company’s business.

The table shows the sales contribution from Dairy Farm’s various business divisions in 2015:

Source: Dairy Farm 2015 annual report

Supermarkets/Hypermarkets is the largest division for Dairy Farm and as its name suggests, it is where Dairy Farm accounts for its supermarkets and hypermarkets. The countries and territories that the division was in in 2015 include Hong Kong, Macau, Singapore, Malaysia and more. Brands in this area include Yong Hui, Cold Storage, Giant, and Hero.

Health and Beauty is the second-largest revenue contributor to Dairy Farm. Here, the company operates stores such as Guardian, Mannings, and Rose Pharmacy.

Despite being only the second largest revenue contributor, the Health and Beauty division contributes the largest proportion of operating profit to Dairy Farm at 38%; this compares with the contribution of 36% for the Supermarkets/Hypermarkets division.

Restaurants and Convenience Stores are tied for third spot in terms of revenue contribution. The Convenience Stores division had 2,269 stores in total at end-2015. As for Restaurants, it comes from Dairy Farm’s Hong Kong-based associate Maxim’s, a food & beverage company offering a diverse mix of Chinese, Japanese, European and Asian restaurants in addition to fast food, cake shops, and coffee outlets.

Home Furnishings is the smallest of the lot, but it is growing quickly – the division’s operating profit had increased by 25% in 2015. The division’s revenue comes from the IKEA furniture stores in Hong Kong, Taiwan, and Indonesia.

As we can see from all the above, there are many moving parts to Dairy Farm’s business. By breaking down the company’s various sources of income, investors can better understand the business and make more-informed investing decisions.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Dairy Farm International Holdings. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.