SINGAPORE (Sept 14): CGS-CIMB Research is keeping its “overweight” rating on the consumer sector, amid optimism that a better-than-expected GDP growth rate in 2018 could spur retail consumption.
The brokerage hosted a Consumer Day on Sept 11, and says investors were largely positive on domestic supermarket plays and also expressed interest in learning about the key value propositions of the e-commerce companies.
“Consumer staples names [such as Sheng Siong Group and Thai Beverage] received the most investor attention [while] e-commerce names also piqued investor interest,” says lead analyst Cezzane See in a Thursday report.
Looking ahead, the analyst believes consumer staple companies could see higher earnings growth momentum, which would lift their stock prices.
Among the consumer sector, CGS-CIMB’s top picks are Sheng Siong Group (SSG) and new listing Synagie Corp.
“We like SSG’s stalwart supermarket business,” says See. “Its new store pipeline should help drive revenue growth in FY19F.”
She notes that SSG has guided that FY18 will be a record year, with eight stores opening. The group also anticipates a healthy Singapore supermarket open tender pipeline over the next three years.
“SSG stands out with its ‘heartland’ consumer-driven supermarket focus and large scale, which makes it the least vulnerable to the rising e-commerce threat, in our view,” See says.
CGS-CIMB has an “add” call on SSG with a target price of $1.26.
As at 3.25pm, shares in Sheng Siong are trading flat at $1.12.
On the e-commerce front, CGS-CIMB says Synagie’s Insurtech business could help catalyse near-term sales growth.
“Synagie expressed confidence of a turnaround in the near term as it continues to ramp up its e-commerce and Insurtech businesses,” says See. “We expect Synagie to turn to profitability by end FY20F.”
At the same time, See adds that she expects Synagie to drive stellar revenue growth through expansion of its e-commerce solutions regionally. The analyst also expects the group to expand beyond its core Body, Beauty and Baby (BBB) brand space to other product segments.
CGS-CIMB has an “add” call on Synagie with a target price of 34 cents.
As at 3.25pm, shares in Synagie are trading half a cent lower at 18.8 cents.
