Brokers' take

Compiled by Anita Gabriel



APRIL 11 CLOSE: $0.975

RHB Group Research, April 11

Our recent checks on some of the new Sheng Siong supermarkets suggest that the company has worked on improving its store display and brand image to appeal to the younger generation.

The new stores are much neater and cleaner.

Despite the other two big players - NTUC FairPrice Co-operative and Dairy Farm - increasing their range of fresh produce, Sheng Siong still boasts the highest percentage of fresh mix in sales.

Sheng Siong also still has a fairly captive population.

We previously highlighted the large number of supermarket sites available for lease was a key concern.

We maintain the view that the close proximity between some of these sites will eventually lead to cannibalisation of sales. The impact will likely be felt in two to three years when most of these sites have been bid for and opened.

The construction of the new extension to the distribution was initially estimated to add 10 per cent in capacity but based on recent conversation with management, it revealed that the extension will add 20 per cent more storage space.

The extension should be completed by early next year and should allow the group to reap more operational efficiencies.

Upgrade to "buy" with a higher target price of $1.11 as a result of a 2 per cent to 3 per cent increase in our FY18-20 estimates and an increase in target price to earnings from 19 times to 21 times.


Maybank Kim Eng, April 10

Fresh data continues to validate our call for a property price rebound. New launches this year have achieved significant premiums over comparable projects launched in recent years.

The price rebound appears to be broad-based with strong performance across all market segments.

There are 15 residential sites up for tender that could add 4,900 units to the pipeline for developers.

These deals represent significant revenue opportunities that developers can pursue to capitalise on the market rebound.

Most developers in Singapore have a net gearing of less than 1.0 times, which implies significant balance-sheet capacity to pursue growth opportunities.

With significant exposure to Singapore's residential market, Bukit Sembawang Estates and City Developments are the biggest beneficiaries of this trend.

A word of caution has to be said about a supply build-up in 2021 estimates.

With collective sale deals since last year potentially adding 20,000 units in their new properties, we see private housing supply rising to over 17,000 units in 2021.

As such, we believe the market could focus on potential weakness from late 2020.

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