SINGAPORE (July 14): OCBC Investment Research continues to rate Sheng Siong Group (SSG) at “buy” with an unchanged fair value estimate of $1.15, pending the supermarket chain operator’s release of its 2Q17 results in the coming weeks.
In a Friday report, lead analyst Jodie Foo says that while Singapore’s May 2017 retail sales data “depicted a generally unexciting picture”, supermarket sales were stable with a 0.8% growth y-o-y.
“Given the overall domestic and external economic environment, OCBC Treasury Research believes the local consumer sentiment look relatively resilient when compared to the start of the year,” adds Foo.
Looking ahead, Foo says she remains mindful of developments such as SSG’s temporary closure of its Loyang store, which re-opened in late Feb this year; the recent closure of The Verge with its last day of operation on Jun 20; the upcoming closure of the group’s Woodlands store in Aug; as well as the upcoming opening of a new about 11,000 sf store along Woodlands St 12 by 3Q17.
Foo believes keen competition and a relatively stable consumer sentiment seen in 1Q is likely to continue into the second quarter for the group’s same store sales growth, and that closure of The Verge store will affect SSG’s 2Q results slightly as well.
Nonetheless, the analyst says the group’s ability to achieve an optimal level of revenue per square foot coupled with sustainable margins, could offer resilience to its earnings.
“While [upcoming Woodlands store] is located about 1km walk from an existing store at Woodlands St 31 Blk 301, we believe management has traditionally been prudent in their decisions and the store should help to boost presence and capture customers. Opportunities to expand also remain,” says Foo.
As at 10.43, shares in Sheng Siong are trading 1% higher at 99 cents.
