Maybank KimEng starts Sheng Siong at Sell on consumer spending slowdown

Sheng Siong supermarket in SingaporeSheng Siong supermarket in Singapore

Maybank KimEng started coverage of Sheng Siong at Sell with a S$0.95 target price, saying the supermarket operator isn’t immune to market headwinds.

“We believe Singapore’s second-largest supermarket chain will not be immune to a slowdown in consumer spending amid economic deceleration anticipated by MKE Economics team in 2019, on top of rising e-commerce competition and changing dining habits,” the brokerage said in a note on Monday.

It pointed to its recent consumer survey which shows home-delivered cooked meals are becoming more frequent in Singapore due to new food-delivery services.

“These are early indicators of a structural change in consumers’ dining habits, where in the interest of time, ready meals are preferred to home-cooked meals. Such a trend is detrimental to supermarkets’ fresh-produce sales,” the note said.

In addition, while the brokerage said it expected new-store growth would provide a one-off boost to revenue, tepid same-store-sales contributions and smaller basket values would likely be a drag ahead.

New stores are also depended on site availability in HDBs, or public-housing developments, Maybank KimEng said, adding it was forecasting four new stores this year and two next, after a higher-than-normal 10 were added in 2018.

The shares were down 0.94 percent at S$1.05 at 10:34 A.M. SGT.

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