Dairy Farm

Dairy Farm: CIMB maintains OutPerform with US$12 TP. Note Reuters has reported that Aeon is in talks to buy Carrefour's Msian hypermarket business for US$300m. Carrefour's Msian business generated US$525m sales in 2011 (vs. Dairy Farm’s estimated US$1.6b Msian sales and Aeon Group’s US$1b). Aeon is a department-store operator in Jap which also runs Jusco supermarkets in Msia. It does not operate hypermarkets. Data gleaned from Nielsen suggests that Jusco does not have a wide network of stores in Msia. Reports also suggest that Carrefour could withdraw from Indonesia. Overall, house view that the news is positive for Dairy Farm. While Carrefour Msia could be replaced by Aeon, a new entrant, note that running hypermarkets is not Aeon's forte. Think Dairy Farm's competitive positioning could be strengthened by the withdrawal of an incumbent. Crucially, Dairy Farm's apparent non-interest towards Carrefour Msia could signal that it is saving ammunition to bid for Carrefour’s Indo business. Having the largest network, Carrefour is the leading hypermarket retailer in Indo. The other two are Giant (under Dairy Farm) and Hypermart (under Matahari). House believe only Dairy Farm has the war chest to acquire Carrefour Indonesia.