Consumer Staples - Overall - CGS-CIMB Research 2018-05-30: Supermarket Sweep

Consumer Sector Singapore - CGS-CIMB Research | SGinvestors.io SHENG SIONG GROUP LTD (SGX:OV8) DAIRY FARM INT'L HOLDINGS LTD (SGX:D01) Y VENTURES GROUP LTD. (SGX:1F1)

Consumer Staples - Overall - Supermarket Sweep

  • We see supermarkets/hypermarkets as key beneficiaries of Singapore’s firmer Retail Sales Index (RSI) excluding motor vehicles, which rose 2.6% y-o-y in Mar 2018.
  • Not only are they gaining market share from convenience stores, they are also likely to be the least disrupted by the growing threat of e-commerce, in our view.
  • We favour Sheng Siong Group as a proxy for the positive prospects for Singapore’s supermarkets and Y Venture (YVEN) as a play on the e-commerce wave.
  • We upgrade the consumer staples sector from Neutral to OVERWEIGHT as we believe the sector is now on firmer footing (with our 2018F GDP growth forecast of 3.2%).


Retail sales on firmer footing

  • In Mar 2018, Singapore’s retail sales index (RSI) excluding motor vehicles (at current prices) grew by 2.6% y-o-y, continuing the positive trend seen in 2017 (1.8%).
  • The RSI typically tracks the GDP growth rate, and given our in-house GDP growth forecast of 3.2% in 2018F, we believe Singapore’s retail sales are on a better footing in 2018F.
  • Euromonitor forecasts Singapore’s retail sales to post a 2017-22F CAGR of 0.7%.


Online sales still small, of which grocery segment has a thin slice

  • Euromonitor estimated internet retail accounted for only 5.4% of Singapore’s total retail sales in 2017 and forecast internet retail sales to rise by a CAGR of 14.5% over 2017- 22F. This implies that online sales would only comprise a modest 10.3% of Singapore’s total retail sales in 2022F.
  • Within that, food and drink (mostly packaged goods and alchoholic drinks as per Euromonitor definition) forms S$177.8m or a mere 0.53% of Singapore’s retail sales, implying that groceries may be the least-popular online item.



“New retail” is coming

  • A KPMG report published in Mar 2018 stated that in the future, successful retail will boil down to customer experience, and as such it is vital for a retailer’s digital and physical touchpoints to work together seamlessly. We interpret this to mean physical stores will continue to exist but will have to innovate to stay relevant.
  • We also believe the emergence of Alibaba in Singapore retail could mean M&As in near term, especially in the non-grocery segment (the bulk of Singapore’s retail sales value in FY17, according to Euromonitor) and cause pressure on sales growth in the medium term.


Large-scale brick-and-mortar grocery players the most defensive

  • Given the few pure online grocery players in Singapore now (e.g. Redmart) and low online dollar value of grocery sales (S$206m, c.0.6% of Singapore’s total retail sales in 2017), we think in the consumer sector, the grocery segment faces the lowest risk of disruption from e-commerce in near term. As M&A activity may rise with Alibaba’s entry, grocery players with large scale (NTUC, Dairy Farm International, Sheng Siong Group) are defensive plays, in our view.


SSG is main proxy for Singapore’s supermarket growth

  • Sheng Siong Group stands out with its “heartland” consumer-driven supermarket focus and large scale, which we believe make it the least vulnerable to the rising e-commerce threat.
  • While its share price has risen 7% YTD to 18.6x forward P/E, SSG is still trading below its ASEAN peers’ average (22.8x) and its historical 3-year mean (20.9x). We believe its forward P/E valuation is unjustified, given its current outlet growth upswing.


YVEN is likely proxy for burgeoning cross-border e-commerce

  • Y Venture has entered into an MOU with SingPost (SGX:S08) for the potential co-development of a cross-border e-commerce platform (codename AORA).
  • Slated for a soft launch in 3Q18F, AORA is likely to focus on cross-border purchases by consumers across Asia, combined with proprietary built-in data analytics.


Company Reports






Cezzane SEE CGS-CIMB Research | Colin TAN CGS-CIMB Research | https://research.itradecimb.com/ 2018-05-30
SGX Stock Analyst Report ADD MAINTAIN ADD 1.260 SAME 1.260
ADD UPGRADE HOLD 9.550 UP 8.40
ADD MAINTAIN ADD 0.62 SAME 0.62



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