3 top consumer picks revealed as RHB expects sector to outperform ST Index in 2019

3 top consumer picks revealed as RHB expects sector to outperform ST Index in 2019

By: 
Stanislaus Jude Chan
04/01/19, 03:35 pm

SINGAPORE (Jan 4): RHB Research is maintaining its “overweight” rating on the Singapore consumer sector, against the backdrop of a global economic slowdown and uncertainty arising from trade tension between the US and China.

“We believe the consumer sector will outperform the [Straits Times Index], given its more defensive nature,” says analyst Juliana Cai in a Friday report.

According to a Nielsen survey released mid-Dec 2018, consumer confidence improved to a high of 98 points in 3Q18. However, it remains in the pessimistic zone, below the baseline of 100 points.

“Weighed down by slower economic growth and concerns on job security, we expect Singaporeans to be prudent spenders in 2019,” says Cai. “Although rental rates are expected to stay flattish in 2019, we think it will still not be an easy year for retailers as they grapple with slowing demand and the need to re-invent themselves to fend off competition.”

That said, the analyst believes companies with resilient earnings that could offer some decent growth could still be expected to do well.

RHB’s top picks for the sector are Sheng Siong Group, Delfi and Genting Singapore. The research house has “buy” calls on all three, with target prices at $1.27, $1.59 and $1.23, respectively.

“We favour companies that have made investments and are ready to reap these rewards this year,” says Cai.

For instance, Cai points out that Sheng Siong could see higher earnings growth in 2019 on the back of aggressive store expansion with 10 new stores opened in 2018. In addition, the expansion of its distribution centre is also expected to help to raise efficiencies and gross margin.

“Sheng Siong should see revenue and earnings growth ramp up,” Cai says. “Amidst market uncertainties, we like the stability that Sheng Siong offers.”

As at 2.53pm, shares in Sheng Siong are trading 1 cent higher at $1.08.

“When it comes to consumer goods, stick with solid brands,” say Cai. One of the companies she highlights is Delfi, the top confectionery player in Indonesia.

“We expect Delfi to benefit from upbeat consumer sentiment and continued traction in its core brand,” she adds. “On top of that, we believe the group is able to reap higher sales and efficiencies with the acquisition of the exclusive and perpetual licence for the Van Houten brand for key markets in Asia Pacific last year.”

As at 2.53pm, shares in Delfi are trading 1 cent higher at $1.31.

Meanwhile, Cai notes that Singapore’s tourism sector remains robust, with tourist arrivals growing by 6.6% y-o-y for 11M18.

The way Cai sees it, Genting Singapore could be a big winner from the growth, especially as visitor arrivals from Greater China, which grew 6% y-o-y, account for over half of GENS’ customers.

“We believe the stock is undervalued vs peers,” Cai says. “We also like Genting on a potential share price re-rating, should it win the bid for a casino licence in Japan.”

As at 3.11pm, shares in Genting Singapore are trading 1.5 cents higher at 98.5 cents.

“In view of a tumultuous year ahead with elevated pressures from slowing economic growth and trade uncertainties, we like the consumer sector for its defensive profile,” Cai says.

Treasure hunting

British collector and expert Harry Fane talks about what it takes to be the world’s foremost authority on vintage Cartier creations and how to spot a good investment buy at his Vintage Cartier Tank watch exhibition at Dover Street Market Singapore (May 20): Harry Fane’s love affair with Cartier began at the tender age of 17. It was the 1970s and his best friend showed up one day, decked out in two must-have items of the era: a pair of Gucci shoes with a gold buckle — “the height of fashion at the time” — and a Cartier watch. “I remember going, ‘Gosh, I really want both of....
Read More >>

Next stop: The interchange of public and private good

SINGAPORE (May 20): Two-minute intervals between trains. Fewer breakdowns. Clean, new buses running at a higher frequency. Bright LED screens displaying details of stops on both buses and trains. To many commuters who are enjoying these benefits, the meltdown of Singapore’s transport system in December 2011, and again in July 2015, is a distant memory. Certainly, services have improved significantly. There are new trains and buses, while existing ones have been spiffed up. There has been an overhaul of the older rail systems, presumably including fixing the grips for the electricity rail ....
Read More >>

Failed Innopac deal portends mining magnate Gutnick’s woes in Australia

SINGAPORE (May 20): The Australian Securities and Investments Commission (ASIC) is seeking judicial permission to wind down mining company Merlin Diamonds. The regulator is also probing into whether its chairman Joseph Gutnick failed in his duties. Gutnick, who is known as “Diamond Joe”, is under investigation for a A$13 million ($12.3 million) loan made by Merlin to AXIS Consultants, a private company linked to him. Merlin shares have been suspended from trading since October 2018. ASIC is seeking an order to appoint Deloitte to liquidate Merlin, owner of the Merlin Diamond Mine Pro....
Read More >>