CFA Society Singapore
SINGAPORE (Feb 1): OCBC is keeping its “neutral” call for the consumer sector but reiterating its “buy” on supermarket operator Sheng Siong Group with a target price of $1.15, thanks to the company’s management strength and largely stable, cash-generative business.
In a Wednesday report, lead analyst Jodie Foo says the year started off on a broadly positive note. The STI is up 5.8% year to date, while the FTSE Consumer Goods Index and FTSE Consumer Services Index were up 3.9% and 1.1%, respectively.
“In our latest sector report on Nov 16, we noted that the consumer sector saw a series of privatisations and acquisitions, suggesting valuations have been generally reasonable,” says Foo.
In the past month, Viz Branz is reportedly planning to re-list on SGX while a Malaysian F&B player is eyeing a potential listing.
Seafood restaurant operator Jumbo had also entered into its first franchise agreement to bring its brand to Vietnam, and its first Jumbo Seafood outlet is expected to open in Ho Chi Minh City in mid-17.
QAF, the manufacturer of the Gardenia brand of sliced bread, also wants to set up new manufacturing plants in the Philippines to cater to the growing demand for bread products. According to Euromonitor International, Gardenia is the leading company in baked goods for Philippines, holding a 13% market share in retail value vs. 10% for Goldilocks Bake Shop.
In addition, OCBC has highlighted Sheng Siong Group and QAF for their stable dividends and decent yield of 3-4%.
Another stock is BreadTalk Group which holds a few strategic investments. As part of a consortium led by Perennial Real Estate Holdings, BreadTalk had announced a divestment of its stake in TripleOne Somerset for a gain of $9.3 million. Last year, the group had given out special dividends totalling $3.8 million, or 45% of the divestment gain from 112 Katong.
“In a similar vein, we think it is likely that shareholders can look forward to special dividends after 1Q17. We keep in mind that the group still holds other strategic investments such as stakes in Chijmes and AXA Tower,” says Foo.
As at 4.09pm, Sheng Siong, Jumbo, QAF and BreadTalk are trading at 94 cents, 78 cents, $1.46 and $1.30 respectively.