Dairy Farm

Dairy Farm: CLSA maintaining its U/w call with US$10.72 TP. The house note that while Dairy Farm maintains a unique Asian retail platform, its Asean businesses are under pressure from competition and in Singapore costs are heavy. Government policies that cut cheap foreign-labour availability are stalling growth. Since 2010 operating profit has shrunk at 6% Cagr and expect continued underperformance. Furthermore, the grp’s focus on rebuilding market share in Malaysia, imply continued margin pressure; volatile market and currency conditions in Indonesia; and potential for disruption of the rational duopoly in Hong Kong supermarkets on the proposed sale of Park N Shop all weigh on shares and support the house Underperform call.