SHENG SIONG GROUP LTD (SGX:OV8)
GENTING SINGAPORE LIMITED (SGX:G13)
DELFI LIMITED (SGX:P34)
THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
DAIRY FARM INT'L HOLDINGS LTD (SGX:D01)
Singapore Strategy 2019 ~ Consumer Sector - Favour Those Ready To Harvest
- Maintain OVERWEIGHT on the consumer sector.
- Against the faster pace of growth in 1H18 and slower economic forecast, we believe the FY19F outlook for the sector will be more subdued. However, we expect the sector to outperform the STI next year, due to its defensive nature amidst market uncertainties from the US-China trade war. We favour companies that have already put in capex for expansion in the previous year(s), and are ready to reap the returns from these investments.
- Our Top Picks for FY19F are Sheng Siong, Delfi and Genting Singapore.
Macros affecting the consumer sector in 2019.
- We expect growth in domestic spending to taper off, in line with the Government’s lower GDP forecast of 1.5- 3.5% for next year. Despite low unemployment rate and real wage growth, we believe overall consumer confidence in Singapore is weighed down by cooling measures in the property sector, as well as uncertainties from the US-China trade war.
- The tourism sector, however, remains resilient, with 9M18 tourist arrivals growing by 7.5% y-o-y. We expect this strong momentum to continue into FY19 – we are positive on Genting Singapore (SGX:G13).
Overall retail sector to experience slower topline growth in FY19F.
- Ongoing competition from e-commerce and o2o strategies is the new normal for the retail sector. On this front, we believe the grocery sub-sector will continue to outperform due greater resilience against online competition.
- We still like Sheng Siong (SGX:OV8) as we see growth coming from its 10 new stores opened in 2018, and potential for gross margin expansion with the commencement of the extension to its distribution centre.
- We are neutral on Dairy Farm (SGX:D01) as it is still undergoing restructuring of its outlet portfolio.
Neutral on consumer foodservice.
- Despite its defensive nature, we think the outlook for the consumer foodservice sector is challenging. With more retail malls wooing consumer foodservice tenants, we believe this sector will see the number of F&B establishments in Singapore growing faster than the Singapore F&B services index. Margins will be eroded when companies expand and see higher start-up costs, but slower growth in topline.
Positive on consumer goods
- Positive on consumer goods companies with strong brand equity and exposure outside of Singapore. Indonesia and Thailand are expected to hold general elections in 2019. Consumer spending will likely be boosted by government stimulus and subsidy.
- We have BUY recommendations on Delfi (SGX:P34) and Thai Beverage (SGX:Y92).
Reaping the harvest, Top Picks are Sheng Siong, Delfi and Genting Singapore.
- We favour companies that have put in investments and are ready to reap the returns this year.
- Sheng Siong, which opened 10 new stores in 2018, is likely to see its revenue ramp up with improvements in margins in FY19F.
- Delfi has renegotiated trade terms with retailers and rationalised its products portfolio over the last two years. We expect its FY19F earnings to be supported by continued traction at its core brands.
- Genting Singapore could see a strong uptick in its share price should it win the bid for a Japanese casino licence.
Juliana Cai CFA
RHB Securities Research
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https://www.rhbinvest.com.sg/
2018-12-14
SGX Stock
Analyst Report
1.270
SAME
1.270
1.230
SAME
1.230
1.590
SAME
1.590
0.750
SAME
0.750
9.600
SAME
9.600
RHB Research | Singapore Strategy 2019 ~ Buy Selectively & Stay Defensive
2019 What To Expect & Market Valuation
2019 Singapore Stock Picks & Investment Themes
RHB Research | Singapore Strategy 2019 ~ Sector Outlook
Banks - NIM Widening To Drive Earnings
Consumer Sector - Favour Those Ready To Harvest
Healthcare Sector - Not In The Pinkest Of Health
Plantation Sector - Brace For Another Year Of Unexciting Prices
Real Estate Sector - Weighed Down By Measures And Rising Interest Rates
REITs - RHB Invest 2018-12-20: Selective Yield Plays Likely To Remain In Favour
Technology Sector - Trade War Uncertainty An Overhang On Tech Stocks
Telecommunication Sector - A Short-Term Reprieve?
Small & Mid-Caps - Pick Selectively From Bottom-up
