DFI Retail's Earnings Outlook, Starbucks Margin Potential Seen Promising

Dow Jones11:15

0315 GMT - DFI Retail Group's earnings outlook and the potential for margin expansion of its Starbucks operations in certain Asian markets seem promising to DBS Group Research's Zheng Feng Chee. DFI's management signaled that the Starbucks operations currently have limited integration with its existing other businesses, which leave meaningful scope for future cost synergies, the analyst says in a note. "The confident tone of management and re-emphasis on underpromising and overdelivering gave us greater conviction that management's short- and medium-term targets are achievable," he adds. These support DBS's projections and imply an attractive valuation of 13 times its 2028 forward price/earnings ratio and 6% 2028 dividend yield. DBS maintains its buy rating and US$4.50 target price. Shares rise 0.3% to US$3.25.

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