DFI Retail Group

[Nick]

Looking further into the balance sheet of Dairy Farm, you will realize that Dairy Farm operates on extremely high leverage. It has slightly above 1 billion in equity, but around 4 billion of assets.

total assets/equity > 3, nearly 4.

Its ROE is of no wonder, simply too high a leverage only.

Its current liability exceed its current asset. Apparently, its vendors has great faith in the company.

But compared to Walmart, I will always take Walmart over Dairy Farm at current valuation and state of finance.

This is an interesting point. I must admit it never occurred to me to look at it in this way.

I think some of the Asian hypermarts are trading at pretty similar valuation. A quick glance of Sun Art Retail Group (largest hypermarket operator in China) shows its trading at PER of 33x with Total Liabilities / Total Equity of 1.36x.

(Not Vested)