Analyzing a Dual-Listed Food & Beverage Group with Dividend Yield above 4%

Article Highlights

• Turnaround in Del Monte’s bottom line for FY2021.
• Trailing 12-month Return on Equity stood at 12%.
• The largest shareholder belongs to Campos Joselito Family.
• FY2021’s total dividend per share came in at 1.63 Singapore cents.

Dual listed on the Mainboards of the Singapore Exchange Securities Trading Limited and the Philippine Stock Exchange, Inc, Del Monte Pacific Limited (“Del Monte”) is a global branded food and beverage company which focus on consumer needs for premium quality, healthy products.

The Group’s heritage brands include: Del Monte, S&W, Contadina and College Inn. Also, the Group has exclusive rights to use the Del Monte trademarks for packaged products in the United States, South America, the Philippines, Indian subcontinent and Myanmar.

Evaluating Del Monte Pacific Limited using 4 Financial Metrics

Revenue & Net Profit

For FY2021, Del Monte’s revenue (Blue Bar) came in flat at S$2.94 billion compared to last year as the higher revenue contribution from Europe and Asia Pacific’s operations is offset by the revenue decline in Americas’ region.

Meanwhile, Del Monte saw a profit after tax (Purple Bar) of S$103.99 million, as compared to a loss of S$128.54 million a year earlier. The turnaround in its bottom line was attributed to the absence of the cost involved in plant closures, severance cost and loss from interest rate swap settlement.

For its trailing 12-month financial performance, Del Monte’s revenue inched up 1.09% y-o-y to S$2.97 billion due to broad-based growth from America, Europe and Asia Pacific regions.

With a better sales mix from higher margin retail branded products, Del Monte’s profit after tax soared by 30.97% to S$136.21 million.

Management Efficiency Ratio

For the past few financial years, Del Monte’s cost to revenue has been on a declining trend, from 79.79% in FY2019 to 73.06% in the trailing 12-month period. In addition, with the improvement in its bottom line for the trailing 12-month period, Del Monte’s Return on Equity (“ROE”) improved to 12.47%.

Overall, this shows that the Group’s business is operating efficiently with a lower cost of revenue and higher ROE.

Ownership

The single largest shareholder belongs to Campos Joselito Family, which has a 71.27% stake in the Group. The family is led by Mr. Joselito D. Campos, JR., who is the current Executive Director, Managing Director and Chief Executive Officer for Del Monte.

The second largest shareholder belongs to the Lee Family with a 5.49% stake in Del Monte. Investors should be intrigued to know that the Lee Family also owns a substantial stake in OCBC Bank (SGX: O39) and Bukit Sembawang Estate (SGX: B61) too.

Dividend

Despite the losses incurred in FY2020, Del Monte has paid out a special dividend of 2.10 Singapore cents per share, on back of the successful private equity investment in Del Monte Philippines (“DMPI”) and the net gain achieved in the investment.

For FY2021, Del Monte paid out a total dividend of 1.63 Singapore cents per share, which translates into a dividend payout ratio of 53.6%. This shows that the Group is balancing out between rewarding shareholders and keeping enough retained earnings on hand for the business.

Based on the current share price of S$0.39, this translates into a dividend yield of 4.18%.

Conclusion and Prospects

With the absence of the one-off expenses incurred, Del Monte has achieved a turnaround in its bottom line for FY2021 despite the flat revenue growth. One positive note is that Del Monte is actively in reducing its operation costs to achieve a better economy of scale.

In terms of prospects, Del Monte will continue to focus on business segments which are on trend and pursue innovation for more convenient, healthy and flavorful solutions. In the international market, it will continue to unlock market opportunities in China while further penetrating underserved markets. The Group aims to strengthen its market leadership domestically and internationally.

Finally, the Group is proactively addressing inflationary impact from commodity headwinds and increased transportation costs through revenue and cost drivers including driving efficiencies and productivity across operations. Barring unforeseen circumstances, the Group expects to generate a higher net profit in FY2022.

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