CGS-CIMB upgraded Sheng Siong to Add from Hold on expectations the stock price will be rewarded for the supermarket operator’s steady earnings and store growth amid market volatility.
“We like that SSSG (same-store sales growth) has improved. GPMs (gross profit margins) have also stabilised. We also think Sheng Siong could stay aggressive in new store bids to gain market share; this will provide a continual pipeline for new store revenue growth,” the brokerage said in a note Tuesday.
Supermarket operator Sheng Siong reported Monday its second quarter net profit rose 7.6 percent on-year to S$18.4 million as revenue grew with the addition of 13 new stores.
The brokerage said the first half results beat its forecast slightly by coming in at 50 percent of its full-year forecast.
It added that management has said it tendered for six more stores in the second quarter, with the outcome due by end-August, outpacing the brokerage’s expectation for three new stores over 2019 and 2020.
“We believe SSG has a good chance of winning at least three to four stores given its nearest competitor Giant is in consolidation mode,” CGS-CIMB said.
It raised its target price to S$1.25 from S$1.10 after increasing earnings per share forecasts by 1 percent to 4 percent for 2019-21.
The stock was up 1.72 percent at S$1.18 at 11:11 A.M. SGT.
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