This is why Carrefour could be Dairy Farm's new cash cow

Carrefour's recent exit may be a staff swoopfest for Dairy Farm.

According to CIMB, Carrefour’s withdrawal from Singapore bodes well for Dairy Farm. Not only will Dairy Farm get a chance to extend its local market leadership, but it can also swoop in on Carrefour’s retail staff, a boon in the current tight labour market.

Here's more from CIMB:

A concrete turnaround of 7-Eleven South China and easing competition are potential share-price levers in the near term. In the
medium term, special dividends could catalyse the stock.

French hypermarket retailer Carrefour has announced plans to close down both its Singapore outlets, at Suntec City Mall and Plaza Singapura. Both are located in the city centre and will be shuttered by year-end. The French retailer pinned its withdrawal on a lack of scalability. It was unable to expand enough to reach a leadership position.

Carrefour in 2010 had expressed intentions to exit Malaysia, Singapore and Thailand. It sold its Thai operations to Big C (BIGC TB, Underperform) in Nov 2010 for €868m. Dairy Farm has the potential to step into Carrefour’s shoes and extend its market leadership after Carrefour’s departure.

Through its Giant banner, it holds more than 50% of the hypermarket market by number of outlets (eight), outmuscling its nearest competitor, co-operative NTUC FairPrice (five hypermarkets in the suburbs). Even before Carrefour’s decision to leave Singapore, Dairy Farm was set on opening a new Giant hypermarket at Suntec (site secured).

Now, it will explore options to take over Carrefour’s outlet at Plaza Singapura. We estimate Carrefour’s sales at €100m from its two outlets, or around 10% of Dairy Farm Singapore’s revenue. This is the potential wallet share for the remaining incumbents. Further, Carrefour’s withdrawal will allow Dairy Farm to swoop in on its retail staff, a boon in the current tight labour market.

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