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Why Duty Free International Ltd’s Share Price Has Jumped 7% Today

Duty Free International Ltd (SGX: 5SO) is the largest multi-channel duty-free and duty paid retailing group in Malaysia. Through its ZON brand of retail shops, the company serves customers across all major entry and exit points in Peninsular Malaysia.

At the time of writing, Duty Free International shares are up 6.8% to S$0.205. What could be the reason behind the share price jump?

Financial results

The most probable reason behind the euphoria is Duty Free International’s solid financial results for the third quarter ended 30 November 2018, which was released after the stock market closed yesterday.

Revenue for the reporting period climbed 19.3% to RM157.0 million from RM131.6 million a year ago. The higher sales was primarily due to an increase in demand for certain products and better sales mix.

Meanwhile, profit before tax surged 142.9% to RM20.6 million mainly due to the higher revenue and net foreign exchange gain in the latest quarter compared to a net foreign exchange loss one year ago. Consequently, net profit attributable to shareholders more than quadrupled, from RM3.3 million to RM15.2 million.

Despite the high profitability, cash flow from operations for the quarter was a negative RM29.7 million, compared to a positive cash flow of RM32.9 million in the third quarter of the previous financial year. The poor showing was due to increases in receivables and inventories for the quarter, which could be a red flag.

For the nine months period, revenue fell 12.2% to RM388.8 million, but net profit attributable to shareholders improved 12.9% RM36.6 million.

Dividend

Shareholders would be delighted to note that the company declared a second interim dividend of S$0.01 per share for the reporting quarter, which will bring the dividend per share declared to date to a total of S$0.018 per share.

Outlook

Duty Free International’s outlook, though, was muted. It said in its earnings release:

“The Group expects the operating environment to remain challenging given the current economic outlook and cautious consumer spending. However, the Group will continue its efforts to identify new market opportunities and strategies to further strengthen its customer base and distribution channels through a wider product offering. The Group will also intensify marketing efforts and closely monitor key cost drivers to remain competitive and profitable for the remaining quarters of the financial year ending 28 February 2019.”

At Duty Free International’s current share price of S$0.205, the company has a trailing price-to-earnings ratio of below 17 and a trailing dividend yield of around 9%.

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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 Sudhan P doesn’t own shares in any companies mentioned.