Sheng Siong rated at Buy by Maybank KimEng on market-share wins

Sheng Siong supermarket in SingaporeSheng Siong supermarket in Singapore

Maybank KimEng resumed coverage of Sheng Siong at Buy, with S$1.20 target price, amid signs supermarkets in Singapore are continuing to win market share despite competition from e-commerce.

“Supermarkets continue to claw market share in Singapore, from convenience stores and traditional market grocers. Despite the increasing popularity of online grocery shopping, they continued to book sales growth in 2017,” the note dated Monday said.

“SSG continues to offer grocery-shopping convenience, focusing on fresh foods in densely-populated HDB estates, where more than 80 percent of Singapore’s residents reside,” it said.

Additionally, reduced competition from smaller supermarket players means that Sheng Siong will have an easier time finding new store locations, the note said, adding that new HDB  housing projects will also open more bidding sites.

Maybank KimEng noted that Sheng Siong’s shares trade at 19 times 2018 earnings per share (EPS), below the five-year average and a 41 percent discount to regional peers.

“We think its future EPS growth, consistently high ROEs and yields have not been priced in. We have also not included potential contributions from its new store in China, opened in the fourth quarter of 2017,” it said.

The stock was up 0.53 percent at S$0.95 at 12:29 P.M. SGT on Wednesday.