Dairy Farm

Dairy Farm: stock is up 13% ytd, outperforming the STI by 9%, thanks to a recovery in the low expectation on retail conditions, particularly in SE Asia in the beginning of the year. Share price is now close to UBS' TP of US$11, and without catalyst for further re-rating, the house downgrades the stock to Neutral. Meanwhile, latest retail sales data indicate a marginal slowdown in topline growth in Hong Kong and Singapore. In HK, Supermarket and Medicines & Cosmetics sales were up 6.1% and 8.7% yoy respectively for 5M14, compared with 6.4%/10.6% growth in 1H13/2H13. In Singapore, supermarket sales dipped into negative territory a t -2.2% yoy (v +2.5% in 2H13) while Medical Goods & Toiletries grew at 2.7% yoy (inline with 2H13) during Jan-May 2014. In Malaysia and Indonesia, although Foods, Beverages & Tobacco sales accelerated to 11% yoy in 1Q14 (from 10% in 2H13) and 17% yoy in 1H14 (from 8% in 2H13), the depreciation of the MYR/IDR by c6%/c17% respectively v USD would have dragged reported growth and contribution for DFI.