My Personal Analysis of Delfi Limited (SGX:P34)

Delfi Limited

Do you love chocolates? If you do, then might love the products distributed by this company known as Delfi Limited that I am going to review.

Delfi Limited was formerly known as Petra Foods Limited. The company changes its name to Delfi Limited in 2016 due to the company’s move away from cocoa ingredients and focus on the sales and marketing of its own brand of chocolate confectionery products in Indonesia, Philippines, Singapore and Malaysia.

Let us take a look in details of the various brands of chocolate distributed by Delfi Limited.

Business

SilverQueen, Ceres, Selamat and Delfi are brands of chocolate distributed by Delfi Limited.

Singaporeans should be familiar with the Delfi brand of chocolates and sugar confectionary as they are commonly found in local supermarkets such as NTUC Fairprice.

Delfi NTUC Fairprice

SilverQueen, Ceres and Selamat are the lesser known brands to Singaporeans. However, they are household names, familiar to generations of Indonesians and Filipinos. SilverQueen and Ceres brands were introduced in the 1950s, Selamat in the 1970s and Delfi in the 1980s.

Delfi’s current portfolio of chocolate and sugar confectionery brands now spans over 400 products. Their broad range of chocolate confectionery products such as molded chocolate, dragees, enrobed wafers, and wafers and biscuits, covers most of the main product categories and widens our product appeal.

Which chocolate below is your favourite?

Delfi Limited Brands of Chocolates

Financial

Market Capitalization

Market capitalisation stood at $470.59 million with total number of issued shares at 611,157,000. Thus, Delfi Limited is considered as a small cap stock.

Revenue

As per what was shown in Delfi’s 2019 annual report, 71.5% of its revenue comes from Indonesia and 28.5% comes from regional markets.

As you can see below, sales have been growing year on year to reach US$472 million in 2019.

For Regional Markets, revenues for FY2019 were higher year on year by 10.7%. The growth was mainly attributed to higher sales in Malaysia and sales of Van Houten products in their
Regional Markets.

Delfi Limited 2019 Revenue Breakdown

In FY2019, the Group’s Own Brands sales increased 9.5%. The growth was driven by the strong demand for their products in the premium format category, mainly in Indonesia which
achieved growth in excess of 20%.

Delfi Own Brand and Agency Brand Revenue Performance

Net Profit

As we can see from its annual report, net profit has been increasing year on year.

2019 2018 2017 2016 2015
Net profit/(loss) attributable to shareholders (US$ million) 28.2 20.9 19.7 26.2 (4.7)

Earning Per Share

Earnings per share has been rather inconsistent year on year.

2019 2018 2017 2016 2015
Earnings per ordinary share (US cents per share) 4.62 3.41 3.6 4.3 (0.8)

Return On Equity

As you can see from the table below, Return on Equity (ROE) is improving year on year.

2019 2018 2017 2016 2015
Return on Equity (%) 13.0 10.2 9.8 11.8 (1.8)

Debt

Net debt is used to determine how well a company can pay all of its debts if they were due immediately. Delfi Limited has a negative net debt which shows that it has more cash and cash equivalents than its financial obligations.

In short, Delfi Limited is financially stable.

2019 2018 2017 2016 2015
Total Debt (US$ million) (58.3) (59.0) (52.2) (53.8) (74.7)
Net Debt (0.7) (4.3) 15.2 14.0 44.9

Dividends

Delfi Limited has been paying dividends constantly every year.

Based on 2019 dividend payout of 2.35 US cents (3.2 Singapore cents) and current share price of S$0.79 (24th March 2021), this translates to an estimated current dividend yield of 4.05%.

2019 2018 2017 2016 2015
Normal (US cents) 2.35 1.89 1.80 2.31 1.28
Special (US cents) 0.81

Management

John Chuang Tiong Choon has been the Group Chief Executive Officer since 2004. He established the company in 1984 and has over 30 years experience in the chocolate, confectionery and cocoa industries and he constantly visits the operations around the globe that make up Petra Foods, coordinating the actions and activities that deliver our growth.

Besides John, the management team comprises of other Directors who had many years experiences on the chocolate, confectionery and cocoa industries.

Summary

What I like about this small cap stock is its strong cash flow and ability to grow its profit year on year. Despite the COVID-19 pandemic, this does not seem to affect Delfi Limited at all. Maybe people eat more chocolates during lock down?

Another thing I like about Delfi is the proven track record and foresight of its management team. In 2015, the company was able to move away from cocoa ingredients which is subjected to raw food supply and demand economical factors and venture into sales and marketing of chocolate confectionary products which has brought the company forward.

As a dividend investor, I have added (nibbled) Delfi Limited to my stock portfolio given that Delfi Limited has been consistent in paying dividends yearly. At the current share price of S$0.79, this is definitely not a steal as current dividend yield is only 4.05%.

What I did not like was the reporting currency for the Group is in US Dollar. The reason is because of the weakening of the operating currencies of their regional businesses (i.e. the Indonesian Rupiah, the Philippines Peso, the Malaysian Ringgit and the Singapore Dollar) during the 2015-2019 period against the US Dollar. This had a negative translational impact on their financial results and concealed the actual physical sales that were achieved.