UNUSUAL LIMITED (SGX:1D1)
SHENG SIONG GROUP LTD (SGX:OV8)
FOOD EMPIRE HOLDINGS LIMITED (SGX:F03)
DELFI LIMITED (SGX:P34)
Consumer Sector - Selective Spending
- Stay NEUTRAL.
- While we expect sector earnings to be resilient in 2020, decelerating economic growth in the region, coupled with macro-economic uncertainties, should tame consumer confidence in 2020 and limit upside potential.
- SHENG SIONG GROUP (SGX:OV8) and UNUSUAL (SGX:1D1) are our sector Top Picks for the coming year. We also like DELFI (SGX:P34) and FOOD EMPIRE (SGX:F03) for their attractive valuations.
Tepid economic growth in Singapore, but consumer spending to stay resilient.
- The Government expects the economy to grow 0.5-2.5% y-o-y in 2020 – a wider range vs 2019’s 0.5-1.0%. While the slow growth and challenging macro-economic environment should continue to dampen sentiment, we think there are sufficient factors to support private consumption next year.
- The upcoming general election in Singapore suggests an expansionary budget with potential for cash incentives to be dished out to consumers, which could help propel consumption.
- Barring an economic recession, the unemployment rate should stay low. In addition, tourist arrivals should remain strong next year, given an increase in meetings, incentives, conferences & exhibitions (MICE) activities. These will bode well for consumer companies with exposure to the Singapore market.
Mixed outlook for the region in 2020.
- Stocks with exposure to Hong Kong – e.g. DAIRY FARM INTERNATIONAL (SGX:D01) and BREADTALK GROUP (SGX:CTN) – are likely to see ongoing earnings pressure, as protests in the city disrupt retail operations and dim consumer sentiment. Tourism is also expected to decline. See Dairy Farm Analyst Reports; BreadTalk Group Analyst Reports.
- In ASEAN, most countries should see more cautious consumer spending patterns, due to slowing income growth prospects and weaker business confidence. The key risk lies in the ability of governments to roll out adequate stimulus measures to support economic growth and domestic consumption. This is especially so for Thailand and Indonesia, where 2019 was a high base due to election spending, which propped up sentiment.
Look out for event-driven catalysts.
- Currently, we are neutral on most of the large-cap consumer stocks due to their tepid earnings growth profiles and fairly-priced valuations. However, we believe THAI BEVERAGE and GENTING SINGAPORE may undergo a share price rerating, on event-driven catalysts.
- THAI BEVERAGE (SGX:Y92) is evaluating the listing of its beer business. While this is still at an early stage, a spin-off of this unit could help unlock some of its value and improve gearing. See Thai Beverage Target Price; Thai Beverage Analyst Reports.
- GENTING SINGAPORE (SGX:G13) is one of the three bidders for an integrated resort (IR) in Osaka, and is preparing for another bid for an IR in Yokohama. We believe winning one of the Japanese IR bids will be a key share price catalyst. See Genting Singapore Target Price; Genting Singapore Analyst Reports.
Top Picks: Sheng Siong, UnUsUaL.
- We continue to like SHENG SIONG GROUP (SGX:OV8) for its ability to generate steady growth with new store openings. See Sheng Siong Target Price; Sheng Siong Analyst Reports.
- UNUSUAL LIMITED (SGX:1D1) is also expected to do well, as it ramps up its pipeline of concerts and family entertainment shows in 2020. See UnUsUaL Target Price; UnUsUaL Analyst Reports.
Juliana Cai
RHB Securities Research
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https://www.rhbinvest.com.sg/
2019-12-11
SGX Stock
Analyst Report
0.420
SAME
0.420
1.39
SAME
1.39
0.830
SAME
0.830
1.680
SAME
1.680
