Small Mid Cap Highlights - UOB Kay Hian 2020-03-12: Assessing Impact Of COVID-19

Small Mid Cap Highlights - UOB Kay Hian Research | SGinvestors.io SHENG SIONG GROUP LTD (SGX:OV8) JAPFA LTD. (SGX:UD2) PROPNEX LIMITED (SGX:OYY) FOOD EMPIRE HOLDINGS LIMITED (SGX:F03) PENGUIN INTERNATIONAL LIMITED (SGX:BTM)

Small Mid Cap Highlights - Assessing Impact Of COVID-19




MAJOR IMPACT - F&B SERVICES SECTOR

  • Singapore has recently put in place additional travel restrictions aimed at limiting the spread of COVID-19. In addition to the earlier ban on tourists from Mainland China, all new visitors with recent travel history to Iran, northern Italy and South Korea will not be allowed entry into or transit through Singapore.
  • Needless to say, tourism related sectors such as the F&B are negatively impacted and are likely to take a significant hit in 2020. Tourism receipts for food & beverage reached S$1.8b for 9M19 of which China and South Korea contributed to approximately 12.2% and 3.6% respectively.
  • Full-service restaurants located in malls that more dependent on tourist will be harder hit. Apart from a drop in sales, fixed overheads will further impact earnings of F&B services companies. The impact could however be partially absorbed by rental subsidies from landlords and budget relief measures.

Jumbo Group (SGX:42R)


Koufu (SGX:VL6)



MAJOR IMPACT – ELECTRONIC MANUFACTURING SERVICES SECTOR

  • SGX-listed EMS players with exposure to China would see an adverse impact from the near-term drop in production capacity, supply chain disruptions, delay in shipments and potentially weaker demand as the outbreak escalates in other countries.
  • For the EMS players under our coverage, we believe companies such as Sunningdale Tech (SGX:BHQ) and Valuetronics would be more heavily impacted as its factories are mainly located in China with the former potentially seeing a more significant impact given its higher exposure to the automobile and consumer segments.
  • National Bureau of Statistics (NBS) on 29 February reported that China’s manufacturing sector PMI stood at 53.7 in Feb 20, a decline from 50 in Jan 20. That said, it appears that production activities are recovering, given that 78.9% of the enterprises surveyed by purchasing managers in China had returned to work as of 25 Feb 20, of which 85.6% were large and medium-sized manufacturing enterprises.

Sunningdale Tech (SGX:BHQ)


Valuetronics (SGX:BN2)



INDIRECT IMPACT FROM EXPOSURE TO O&G SECTOR


CSE Global (SGX:544)


Food Empire (SGX:F03)



MINIMAL IMPACT


Japfa (SGX:UD2)


PropNex (SGX:OYY)


Sheng Siong (SGX:OV8)

  • In the latest results briefing, management highlighted that the impact of COVID-19 apart from the short period of panic buying which has now stabilised, is the potential disruption to supply chains should the outbreak escalate. However, thus far, there has been no major disruption to supply chain products, with the exception of a few hygiene-related products and pork (due to African Swine Fever).
  • We made changes to our estimates as we factored in a higher SFRS16 impact, adjusted our revenue psf forecast upward slightly and included additional income from the job support scheme, credit wage scheme and HDB rental waivers announced in the budget. We raise our 2020 and 2021 net profit estimates by 0.1% and 0.2%.
  • We raised our target to S$1.32, from S$1.29.
  • See Sheng Siong Share PriceSheng Siong Target PriceSheng Siong Analyst ReportsSheng Siong Dividend HistorySheng Siong AnnouncementsSheng Siong Latest News

Penguin International (SGX:BTM)


Fu Yu (SGX:F13)






John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2020-03-12
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.32 UP 1.290
BUY MAINTAIN BUY 0.880 SAME 0.880
BUY MAINTAIN BUY 0.680 SAME 0.680
BUY MAINTAIN BUY 0.920 SAME 0.920
BUY MAINTAIN BUY 0.850 SAME 0.850



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