SINGAPORE (July 21): DBS expects modern grocery retail (MGR) to grow further as it has increased its penetration by 30% in Asean-5 over the past two years, from 29.6% in 2015.
Euromonitor projects that the MGR growth in Asean-5 to be at a five-year CAGR of 7.4%, reaching US$93 billion ($127.2 billion) by 2021.
In a Tuesday report, analyst Alfie Yeo says that larger players in Asean are at advantage of gaining further operating scale and those with efficient operations and backend logistics could present themselves as an attractive target for takeover.
The analyst’s top “buy” picks include Singapore listed Dairy Farm International and Sheng Siong Group, Thailand’s CP ALL and Robinsons Retail of the Philippines, as these stocks are expected to post earnings growth led by margin expansion, with potential of re-rating when earnings outperform.
Although online grocery retail has been booming in Singapore, it still faces challenges.
Local online grocery RedMart remains unprofitable as it faces challenges such as convenience of shopping in traditional stores, expensive last-mile delivery, an entrenched lifestyle of grocery shopping, and consumers’ preference to physically pick the fresh produce in stores.
Shares in Dairy Farm, Sheng Siong Group, CP ALL and Robinson Retail closed at US$8.18, 99 cents, 60.75 baht and 86.5 pesos respectively on Friday