Indonesia is Delfi’s key market, and recent data suggests that consumer sentiment is picking up, boding well for the group’s sales. A survey by Bank Indonesia showed that consumer confidence has been improving since Jan-17 and in May the level reached its peak of 125.9 since 2000. In addition, the current Ramadan period is one of the key occasions for Delfi and may help to boost their chocolate sales as well.

Meanwhile, recall that the group had conducted a product portfolio rationalization mostly in 4Q16, and will remain focused on driving growth for its remaining SKUs, particularly under their Own Brands products.

Collaborations with Orion and Yuraku Confectionery would also allow Delfi to expand its product portfolio and reach more consumers. On the other hand, selling and distribution costs are expected to remain high given the continued investments in brand building and presence.

As such, we keep our HOLD and S$2.21 FV estimate.

Source: OCBC Research - 16 Jun 2017