Sheng Siong Group - Still Positive on Demand Post Circuit Breaker

Date: 18/05/2020

Source  :  DBS
Stock  :  Sheng Siong       Price Target  :  1.66      |      Price Call  :  BUY
        Last Price  :  1.63      |      Upside/Downside  :  +0.03 (1.84%)

  • Sheng Siong (SGX:OV8) to continue benefitting post Circuit Breaker as easing expected to be done at a slow pace.
  • Full-blown positive impact of Circuit Breaker from April.
  • More positives for shopper footfall if other retailers are still not given the green light to commence operations.

Maintain BUY for Sheng Siong on 10% Potential Upside Including Dividends

  • We raised our Target Price to S$1.66 as we roll over our valuation base to 25x PE on FY21F (previously FY20F) earnings.
  • We continue to like Singapore supermarkets and Sheng Siong is a direct beneficiary with close to full exposure to this segment. 1Q20 earnings have validated our initial view that sales would benefit strongly. The full impact of the Circuit Breaker and extended measures will be seen from April sales. As the Circuit Breaker restrictions ease, those cautious will continue to stay home, supporting sales going forward post Circuit breaker.

Where We Differ

  • Our estimates are above consensus as we believe the market has yet to factor in the full impact of the circuit breaker.

Potential Catalysts

  • We believe that Sheng Siong, with its strong store network and logistics chain, could be a takeover target for online players eventually. Online players such as Alibaba’s Hema (盒马鲜生) and Amazon (Wholefoods) are taking the online-to-offline route and operating physical stores.


  • Our target price for Sheng Siong is raised to S$1.66, based on 25x FY21F (previously FY20F) PE, pegged to regional peers.

Key Risks to Our View

  • Store openings, price competition. Revenue growth will be led by new store openings. Excessive discounts and promotions by competitors will ultimately result in lower margins.

Source: DBS Research - 18 May 2020

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Labels: Sheng Siong

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Sheng Siong 1.63 -0.01 (0.61%) 761 

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