Sheng Siong Group

Sheng Siong Group | BUY

Aug 20 close: S$1.11

Target price: S$1.30

RHB Research, Aug 20

Sheng Siong is our top pick in the Singapore consumer sector. We reiterate our "buy" call with a higher target price of S$1.30 from S$1.27 previously, implying a 19 per cent upside.

The group announced last Friday that it has signed another two new leases in Woodlands, which are expected to be operational this year. This brings total store wins to eight this year, and the group's total store count to 52 up from 44, in line with our forecast.

Besides the two new stores, Sheng Siong is also the highest bidder for two new shops at Block 451 Bukit Batok (6,880 square feet) and Block 573 Woodlands (10,730 sqf). Barring any unforeseen circumstances, HDB is likely to accept these bids over the next couple of months, and we expect these stores to commence operations either late this year, or early 2019.

Given the larger than expected retail space, we raise our 2019F-2020F earnings by 2 to 3 per cent. There is still great potential for growth, with six new supermarket sites scheduled for tender from now until the year-end, according to HDB. Any further new store wins would provide greater upside potential to our current estimates.

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