Return of the (Silver)Queen
- 2H21 core PATMI beats expectations, soaring c.110% to US$14.0m
- Special dividend of 0.48 UScts proposed, bringing total dividend to 2.83 UScts
- Sales momentum to remain strong in FY22 on reopening of key markets, Indonesia and Philippines
- Maintain BUY with a slightly higher TP of S$1.10
Investment Thesis:
Undervalued consumer stock with growing dividends. Delfi’s valuation is attractive, at 12.1x FY22F PE (below -1SD of its four-year historical mean). Following the group’s special dividend announcement, we see Delfi as a potential dividend play, offering between a 4%-5% yield based on current prices.
Leading chocolate confectionery player in ASEAN’s largest economy. According to Euromonitor, Delfi is Indonesia’s market leader in chocolate confectionery, with a market share in excess of 39%.
Redesigned SilverQueen premium chocolate to target younger individuals in Indonesia. Delfi has launched two new healthier products as well as refreshed products under its SilverQueen brand. These efforts target Gen Z and Millennials in Indonesia and could also enable Delfi to premiumise and capitalise on Indonesia’s increasingly health-conscious population.
Valuation:
Maintain BUY with a slightly higher TP of S$1.10 pegged at 18.0x FY22F earnings (-0.3SD from the four-year mean forward PE). Delfi currently trades at an attractive valuation of 12.1x FY22F PE (below -1SD from the four-year mean forward PE) and has only risen c.20% from its pandemic lows.
Where we differ:
We believe that a continued recovery of the Indonesia Consumer Confidence Index should drive Delfi’s share price higher.
Key Risks to Our View:
Large loss of market share, inflationary pressure causing higher than expected rise in input costs.