Delfi Ltd’s 1Q17 revenue was 10.1% down YoY to US$93.1m while PATMI was a tad lower than expected, declining 33% to US$5.6m. These formed 22% and 17% of our full year estimates, respectively.

The group’s sales performance was impacted by an on-going product portfolio rationalization exercise that was implemented in 2016, which includes eliminating lower performing SKUs, as well as an on-going review of trading terms.

In particular, sales from key market Indonesia was down 15% to US$64.7m, but this may have come off from a high base as management cited that 1Q16 sales recorded higher than usual trade deliveries as a reaction from reduced order levels back in 2015.

In addition, selling and distribution costs remained high. Management now expects FY17 financial performance to be similar to FY16.

Pending more information from the analyst briefing, we keep our HOLD rating and fair value estimate of S$2.37 for now.

Source: OCBC Research - 9 May 2017