<Results First Take> 2H21 results beat as premiumization pivot bears fruit; Special dividend proposed
- 2H21 EBITDA and PATMI soars 72.7% and 155.0% y-o-y on higher gross margins and lower SG&A expenses
- Special dividend of 0.48 UScts proposed brings total FY21 dividend to 2.83 UScts
- Operationally FY22 expected to be better as ASEAN region reopening gathers pace
- We currently have a BUY call with TP of S$1.07
| US$m | 2H21 | 2H20 | 1H21 | y-o-y | h-o-h | FY21 | FY20 | FY19 | Comments |
| Revenue | 194.6 | 188.0 | 210.5 | 3.5% | -7.5% | 405.1 | 385.1 | 440.7 | |
| Indonesia | 126.2 | 121.9 | 144.0 | 3.5% | -12.4% | 270.2 | 255.2 | 309.7 | |
| – Own Brands | 87.1 | 85.2 | 103.4 | 2.3% | -15.7% | 190.5 | 182.8 | 226.9 | Premium products saw double digit y-o-y growth in 2H21 |
| – Agency Brands | 39.1 | 36.8 | 40.6 | 6.3% | -3.9% | 79.7 | 72.4 | 82.8 | Driven by snack and breakfast products |
| Regional Markets | 68.5 | 66.1 | 66.5 | 3.6% | 2.9% | 134.9 | 129.9 | 131.0 | |
| – Own Brands | 24.8 | 26.5 | 22.1 | -6.4% | 12.4% | 46.9 | 50.0 | 50.2 | |
| – Agency Brands | 43.6 | 39.5 | 44.4 | 10.4% | -1.7% | 88.0 | 79.9 | 80.8 | Driven by Malaysian breakfast, sugar confectionery, healthcare and snacking products |
| Gross Profit Margin | 30.1% | 26.9% | 29.0% | 3.2ppt | 1.1ppt | 29.5% | 28.6% | 30.2% | Helped by higher premium brands contribution to sales mix |
| EBITDA | 31.6 | 18.3 | 26.5 | 72.7% | 19.4% | 58.1 | 43.9 | 59.6 | SG&A expenses saw significant improvement |
| EBITDA Margin | 16.3% | 9.7% | 12.6% | 6.5ppt | 3.7ppt | 14.3% | 11.4% | 13.5% | |
| PATMI | 17.0 | 6.7 | 12.3 | 155.0% | 38.0% | 29.3 | 17.5 | 28.2 | Includes one off item of US$4.1m, improvement driven by better EBIT and markedly lower finance expenses |
What’s New
FY21 results beat forecasts on better sales and margins. Delfi reported better year-on-year sales of US$194.6m in 2H21. The improved performance came on the back of stronger Indonesia Own Brands and Agency Brands sales and Regional Markets Agency Brands figures. To elaborate, lockdowns in Indonesia in FY21 were less strict compared to FY20 although Indonesia did see a spike in COVID-19 cases in early-2H21. Notably, gross profit margins also improved 3.2ppt y-o-y and 1.2ppt h-o-h on higher contribution of Premium brands (SilverQueen and ChaCha) in Indonesia which achieved double digit y-o-y growth in 2H21.
Special dividend of 0.48 UScts proposed as core PATMI leaps 49% y-o-y. Together with an improvement in gross margins, 2H21 EBITDA margins delivered a 6.5ppt y-o-y (+3.7ppt h-o-h) increase largely due to controlled selling & distribution expenses which declined 17.3% y-o-y. Finance expenses were also sharply lower (by c.US$2m) after Delfi repaid a bulk of its bank loans during the year.
Our View
Operationally better FY22 expected. As the reopening of Indonesia and the wider ASEAN region gathers pace and mobility is restored, Delfi is likely to see better FY22 sales given the impulsive nature of chocolate purchases. Delfi is also continuing its premiumization pivot and will look to improve channel efficiencies especially in Modern Trade. The Group has also set in place plans to resize/adjust prices as a measure to counter rising inflation (cocoa prices are up c.2% YTD).
Total dividend of 2.83 UScts represents 5.1% yield at current prices. We note that this is the highest dividend Delfi has paid since at least FY15. Current valuations represent an attractive level of 12.5x FY22F PE (-1SD of 4-year mean forward PE). Delfi’s stock has only risen c.20% from its pandemic lows and still remains some way off pre-COVID prices of around S$1.00.
We currently have a BUY call with a TP of S$1.07. More details after the briefing tomorrow.