CTG DUTY-FREE(SH:601888) Xin Lang Cai Jing·2026-01-20 14:02Core Viewpoint - China Duty Free Group (CDFG) is expanding its business by acquiring DFS Group's retail operations in Greater China for up to $395 million (approximately 2.75 billion RMB), which is seen as a strategic move to enhance its presence in the Hong Kong and Macau markets [1][9]. Group 1: Acquisition Details - The acquisition price is based on the valuation of DFS's core assets in Greater China, specifically seven stores in Macau and two in Hong Kong, using market-based valuation methods [1]. - The valuation for Macau stores is set at 26.38 billion RMB based on an EV/EBITDA multiple of 14.54, while the Hong Kong stores are valued at 4.96 billion RMB using an EV/sales multiple of 1.50 [1]. - The deal is considered financially reasonable and strategically significant for CDFG, as it addresses gaps in its market presence in Hong Kong and Macau [1][9]. Group 2: DFS's Business Context - DFS has faced challenges in the global luxury market and is undergoing restructuring, including the closure of several stores and exiting markets like Australia and New Zealand [5][6]. - In Greater China, DFS's operations have been limited, particularly in mainland China due to the scarcity of duty-free licenses, leading to reliance on partnerships with local companies [6][8]. - The sale of its retail business in Greater China is not unexpected given DFS's struggles and the need to streamline operations [8]. Group 3: Market Dynamics - The tourism retail market in Hong Kong and Macau is under pressure, with a declining proportion of travel spending on shopping, as consumers shift focus to experiential travel [10][11]. - Despite the challenges, the number of inbound tourists to Macau is recovering, with a projected compound annual growth rate of around 9% over the next five years [10]. - CDFG's acquisition is expected to reshape the competitive landscape in the region, enhancing its market position against other international operators [9]. Group 4: Strategic Implications for CDFG - The acquisition is part of CDFG's broader strategy to strengthen its international presence and enhance its supply chain through collaboration with LVMH, which holds a stake in DFS [11]. - CDFG aims to leverage this acquisition to accelerate its international business expansion, which has been primarily exploratory and limited in scale [11]. - Maintaining a strong domestic market presence remains crucial for CDFG, especially as its revenue and net profit have seen declines in recent periods [12].