Consumer Sector - RHB Invest 2019-12-11: Selective Spending

Consumer Sector - RHB Investment Research | SGinvestors.io 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.



Top Picks: Sheng Siong, UnUsUaL.






Juliana Cai RHB Securities Research | https://www.rhbinvest.com.sg/ 2019-12-11
SGX Stock Analyst Report BUY MAINTAIN BUY 0.420 SAME 0.420
BUY MAINTAIN BUY 1.39 SAME 1.39
BUY MAINTAIN BUY 0.830 SAME 0.830
BUY MAINTAIN BUY 1.680 SAME 1.680



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