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Dabao's avatar

Hi Carsten,

I think the idea of Delfi is quite interesting:

1. It is similar to Peter Lynch's "blossoms in the dessert" concepts. High inflation and under develop logistic infrastructure makes Indonesian market very tough for multinational corporations to compete. Delfi invested a lot of time to penetrate numerous stalls and kiosks with well developed products to achieve a high market share.

2. Over the years selling and distribution cost as a percentage of revenue drops significantly. In 2016 the percentage is 19.59% and 2022 H1 is 12.64%. It shows the business scales well and these savings are flowing into the bottom line.

3. Capex from 2019 onwards greatly reduced. We should see depreciation expense in the future drops and produces a healthier margin and bottom line.

4. With >400K POS I can see Delfi makes a lot of sense for food and beverages multinational corporations to invest, eg. Vitasoy, Tingyi, Nissin Food, Ottogi...etc. Chocolate pairs well with RTD such as tea and coffee. Also these MNCs facing many challenges in their home market: persistent Covid zero strategy in China, aging population in South Korea and Japan. Vitasoy issued a poorly worded internal memo and had to face the wrath of Mainland consumers. The Chinese market is too capricious and diversification into SEA market makes a lot of sense for Chinese MNCs.

5. From 2017 and onwards the payout ratio is above 44%. There was also a massive $60 million return of capital in 2016. This shows the company is shareholder friendly and one should be well compensated while holding it.

Thanks for sharing,

Andy

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IJW's avatar

RCS Media looks very interesting. Bought a small stake. It seems we have a similar view on investing :) . Focus on cheap, like dividends and all around the world.

Is Delfi still going to get sold? It kind of looks like the typical Singapore no-low growth valuetrap to me. SE currencies weakened about 10% vs the USD. So LTM PE is now about 12x. And possibly they will suffer some cost inflation as well.

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