Delfi Limited: A Deep Dive into Its Fair Value

Delfi Limited (SGX:P34), a leading consumer staples company, has been under the spotlight recently due to its market performance and valuation. As of March 2025, Delfi's market capitalization stands at SGD 446.14 million, with an enterprise value of SGD 416.26 million. To assess Delfi's fair value, we must consider various financial metrics and compare them to its peers in the consumer staples sector.



Key Financial Metrics
Delfi's P/E ratio of 9.63 is lower than the industry average of 12.15, suggesting that Delfi may be undervalued compared to its peers. Additionally, Delfi's EV/EBITDA ratio of 4.84 is lower than the industry average of 10.10, indicating that Delfi's valuation is more attractive than its peers. The company's P/S ratio of 0.65 is also lower than the industry average of 2.15, suggesting that Delfi's stock price is relatively low compared to its sales, indicating potential undervaluation. Furthermore, Delfi's P/B ratio of 1.24 is lower than the industry average of 3.15, indicating that Delfi's stock price is relatively low compared to its book value, suggesting potential undervaluation.

Dividend History and Payout Ratio
Delfi Limited has a history of paying dividends, with the annual dividend per share ranging from S$0.02 to S$0.04 over the past few years. The payout ratio, which represents the proportion of earnings paid out as dividends, has been relatively stable, hovering around 78.19% in the most recent period. The dividend yield, which is the annual dividend divided by the stock price, has been attractive, ranging from 4.4% to 5.99% over the past year. This indicates that Delfi Limited's dividend has been relatively stable and attractive to investors.

Looking at the future, Delfi Limited's dividend growth rate has been negative in recent years, with a year-over-year change of -9.18%. However, the company's earnings growth rate is expected to be positive, with a forecast of 5.8% per annum. This suggests that the company may be able to maintain or even increase its dividend payout in the future, assuming earnings growth materializes.



Interest Rates and Market Volatility
Interest rates and market volatility play a significant role in determining Delfi Limited's fair value. Higher interest rates increase the cost of debt, leading to a higher weighted average cost of capital (WACC). This, in turn, reduces the present value of Delfi's future cash flows, resulting in a lower fair value. Conversely, lower interest rates decrease the cost of debt, leading to a lower WACC and a higher fair value for Delfi Limited. Market volatility affects the beta of Delfi Limited, which measures the systematic risk of the company relative to the market. A higher beta indicates that Delfi Limited's stock price is more sensitive to market movements, making it riskier. This increases the risk premium investors demand, leading to a higher cost of equity and a higher WACC. Consequently, Delfi Limited's fair value may be lower during periods of high market volatility.

To manage these risks effectively, investors can diversify their portfolios, hedge against interest rate risk and market volatility, focus on value investing, and monitor and adjust their investment strategies based on interest rate changes and market volatility.

Conclusion
Delfi Limited's financial metrics, dividend history, and payout ratio suggest that the company may be undervalued compared to its peers in the consumer staples sector. However, investors should consider the impact of interest rates and market volatility on Delfi Limited's fair value and manage these risks effectively. By doing so, investors can make more informed decisions about Delfi Limited's fair value and enhance their overall investment performance.