Sheng Siong likely to see stellar FY19F as growth momentum continues: DBS

Sheng Siong likely to see stellar FY19F as growth momentum continues: DBS

Michelle Zhu
31/07/18, 03:21 pm

SINGAPORE (July 31): DBS Group Research is maintaining its “buy” call on Sheng Siong Group (SSG) with a higher target price of $1.26, implying 25 times FY19F earnings.

The valuation is pegged at +1 standard deviation (SD) point of SSG’s historical mean valuation since listing, and below regional peers’ average of 26 times earnings.

See: Sheng Siong posts 6.3% rise in 2Q earnings to $17.2 mil on higher sales

In a Tuesday report, analyst Alfie Yeo notes that SGG’s growth thus far has been driven by more stores, improving efficiencies, and margins which have continued to strengthen with more supplier rebates and lower costs.

He sees this improving further once the group’s warehouse expansion is operational in FY19F.

Additionally, Yeo believes the stock is poised to ride on the robust near-term outlook for new HDB supermarkets, with at least seven outlets up for tender in the next six months.

“Same store sales growth (SSSG) and sales per square feet matrices also remain strong. Dividend yield is decent at 3-3.5% with potential scope for a higher payout,” says the analyst.

For now, Yeo does not think Amazon’s entry as a serious threat to SSG given their different target customer base, Amazon’s relatively small warehouse, and his belief that the online market will take time to gain share from brick-and-mortar stores.

“We believe that Sheng Siong, with its decent store network and logistics chain, could possibly be a takeover target for online players eventually. Online players such as Alibaba’s Hema supermarket and Amazon (Wholefoods) are taking the online-to-offline route, and are operating physical stores. We see scope for higher dividend payout if there is excess cash on its books,” he concludes.

As at 3.16pm, shares in SSG are trading 1 cent lower at $1.06, or 5.8 times FY19F book.

CapitaLand Mall Trust upgraded to 'buy' by UOB on Jurong Lake District plans, Funan launch

SINGAPORE (May 27): CapitaLand Mall Trust will benefit from the development of Jurong Lake District (JLD) as it has three retail malls located within Jurong Gateway, says UOB KayHian. See: CapitaLand Mall Trust declares 3.6% higher DPU of 2.88 cents on higher income IMM Building, JCube and Westgate, which in total accounts for 20% of CMT’s portfolio valuation, are located within Jurong Gateway and adjacent to Jurong East MRT station. Meanwhile, Funan, which is about 90% pre-committed for retail space and 98% pre-committed for office space, is scheduled to open next month. See als....

Time to 'buy' MindChamps as growth initiatives bear fruit: RHB

SINGAPORE (May 27): RHB Research continues to keep MindChamps Preschool at “buy” at a lower target price of 83 cents compared to 87 cents previously, indicating a 26% upside plus 2.2% yield. The reduced target price comes after cutting FY19-20F earnings by 7% and 11%, respectively, upon management indications that adopting SFRS 16 has negatively impacted the group’s 1Q19 pre-tax profit by about $90 million or -15%. In a May 17 report, analyst Juliana Cai says she nonetheless remains positive on MindChamps as she expects the group to start reaping returns from its investments as its....

Ascendas-Singbridge establishes co-innovation lab with IMDA & Enterprise Singapore

SINGAPORE (May 27): Singapore’s smart nation ambitions have been further bolstered by a new partnership between Ascendas-Singbridge, Infocomm Development Authority of Singapore (IMDA) and Enterprise Singapore (ESG) to form the Smart Urban Co-Innovation Lab. All three parties are looking to have a total of 30 co-innovation projects come out from the lab, which is expected to be launched at the end of the year as the first developer-led lab in Southeast Asia. This announcement follows last year’s call for innovation led by IMDA, Ascendas and JTC. Ascendas has published 12 probl....