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Navigate Singapore 2019 ~ Consumer / Gaming - CGS-CIMB Research 2018-11-29: OVERWEIGHT

Navigate Singapore 2019 ~ Consumer/Gaming - CGS-CIMB Research | SGinvestors.io SHENG SIONG GROUP LTD (SGX:OV8) DAIRY FARM INT'L HOLDINGS LTD (SGX:D01) GENTING SINGAPORE LIMITED (SGX:G13) JAPFA LTD. (SGX:UD2)

Navigate Singapore 2019 ~ Consumer / Gaming - OVERWEIGHT


Positive Trends


Sheng Siong announced record store openings in FY18.

  • In the 3Q18 results season, SHENG SIONG GROUP (SGX:OV8) guided that it aims to open the two HDB stores within FY18 (Block 451 Bukit Batok (6,880 sq ft) and Block 573 Woodlands (10,730 sq ft)), after it submitted the highest bid in Aug 18. This takes Sheng Siong Group’s new store count to 10, a record high since its listing in FY11. This should have positive spillover effects on revenue growth in FY19.
  • Based on data from the Housing Development Board (HDB), there are still nine supermarket open bids until end-19.

Japfa’s poultry and swine stay on course.

  • JAPFA LTD (SGX:UD2)'s 9M18 core net profit of US$74.3m was up 113% y-o-y (excluding other gains, some forex and bio asset revaluation) due to the Indonesian poultry segment which continued to be buoyed by especially high average selling prices (ASP) for day-old chicks (DOC) and broilers.
  • Meanwhile, still-high Vietnam swine prices kept the Animal Protein Other (APO) segment in the black (vs. losses in 9M17).

GENS keeps market share, non-gaming revenue jumps in 3Q18.

  • GENTING SINGAPORE LIMITED (SGX:G13)'s 9M18 estimated VIP volume market share grew to 48.5% (vs. 9M17: 35.6%); as it turned on the VIP credit and managed to keep a hold on its VIP portfolio. In the mass segment, 9M18 GGR market share kept pace with the industry at 39.4% (vs. 39.3% in 9M17).
  • 9M18 gaming revenue grew 2.3%; and was augmented by a 6.6% y-o-y jump in 9M18 non-gaming revenue which benefited from higher footfall in Universal Studios and higher prices for the aquarium. 9M18 adj. EBITDA rose 5.3% y-o-y to S$943.6m (vs. 9M17: S$895.9m).


Negative Trends


Dairy Farm releases mixed 3Q18 interim statement:

  • DAIRY FARM INT'L HOLDINGS LTD (SGX:D01)'s Health and Beauty, Home Furnishings and Restaurants were strong, but Hong Kong and South East Asia (SEA) Food business was soft. North Asia’s food business was hit by cost pressures, especially from rents. In the SEA food segment, Singapore and Malaysia still saw low profits while Indonesia remained in the red.
  • Dairy Farm International expects challenges to continue for the remainder of the year, while full-year results are expected to be impacted by increasing costs from its ongoing programme to invest in technology, supply chain infrastructure, stores and employees in order to improve the long-term performance of the business.

First dip in SSG’s same-store-sales growth.

  • Sheng Siong Group’s 3Q18 y-o-y same-store sales growth of 0.2% was a negative surprise as it was a shade lower than the average of 2.5% in the previous four quarters.


Looking To 2019


Consumer sector earnings growth of 12.7%; attractive valuations.

  • We remain positive on the consumer segment as it is still trading attractively below the long-term average mean despite average CY19F earnings growth of 12.7%. The sector currently trades at -1 s.d. below long-term average mean, driven by large-cap stocks including THAI BEVERAGE (SGX:Y92) (CY19F P/E of 17x vs. average of 20x) and Sheng Siong Group (CY19F P/E of 19.5x vs. average of 20x).
  • In terms of earnings growth, we expect Sheng Siong Group’s CY19F EPS to grow 17.2% on the back of new store revenue growth and expansion in gross profit margins.
  • For Thai Beverage, we are penciling EPS growth of 2.4% for FY19F on the back of a recovery in domestic spirit and beer consumption which we expect to be catalysed by the upcoming Thai presidential elections slated for 1H19F.
  • For Japfa, we expect the sustained Vietnam swine prices and Indonesian day-old-chick prices to drive FY19 EPS by 11%.
  • For BEST WORLD INTERNATIONAL LTD (SGX:CGN), we see core FY19F EPS growing by 29% as its franchise revenues take flight in China.
  • For the gaming sector, we expect Genting Singapore to be able to sustain FY19F adjusted EBITDA of S$1.2bn (flat y-o-y growth as we are cognisant that global trade headwinds could put a dampener on forward gross gaming revenue (GGR) growth) on a rolling-chip volume market share of 48% and mass GGR market share of 41.6%. Genting Singapore hopes to be able to share more on the redevelopment plans of Resorts World Sentosa (RWS) by 1H19F. Thereafter the bidding for the Japan Integrated Resorts (IR) licence, expected in 2H19F, could be another catalyst for the stock and the sector.


Stock Preference

  • Amongst our stocks we like Sheng Siong Group as a defensive bet. We believe its fresh-food focus and mass market focus accord it some defence against the e-commerce threat. FY19F revenue growth should be fueled by 10 new store openings in FY18F, which provides some mitigation in an environment of competitive same-store-sales growth. The stock boasts a strong balance sheet with a net cash position of S$67.1m and is also currently trading at 19.5x P/E, below its long term mean of 20x.
  • We also like Genting Singapore. At 6.3x forward EV/EBITDA (close to -1.5 s.d.), we believe markets are likening the stock to its trough in FY15-16 when adjusted EBITDA trended below S$900m due to sluggish gross gaming revenues and high trade receivable impairments ( > S$200m). We think this could be excessive given that it is now on better footing (i.e. trade receivables balance below S$200m/quarterly trade receivable impairments below S$20m). Hence, we also have an ADD call on the stock.





Cezzane SEE CGS-CIMB Research | https://research.itradecimb.com/ 2018-11-29
SGX Stock Analyst Report ADD MAINTAIN ADD 1.250 SAME 1.250
HOLD MAINTAIN HOLD 9.770 SAME 9.770
ADD MAINTAIN ADD 1.280 SAME 1.280
ADD MAINTAIN ADD 0.800 SAME 0.800





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