Sheng Siong Group - RHB Invest 2020-04-09: Circuit Breaker To Keep Sales Resilient; Keep BUY

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SHENG SIONG GROUP LTD (SGX:OV8)

Sheng Siong Group - Circuit Breaker To Keep Sales Resilient; Keep BUY

• As Singapore introduced circuit breaker measures to contain the spread of COVID-19, consumers are more likely to turn to supermarkets for food until the restrictions ease. Nevertheless, we expect supermarkets spending would remain resilient after the 4-week period as restrictions are likely to be eased in stages to prevent another wave of viral contagion.

Singapore supermarket spending was up in February.

• Supermarket retail sales were up 15.5% y-o-y and 15.4% m-o-m, despite the post-Lunar New Year lull season. We think this is mainly due to panic buying when Singapore raised its risk assessment to Disease Outbreak Response System Condition (DORSCON) Orange.

Expect supermarket sales to stay robust in April due to 4-week circuit breaker.

• Although food establishments remain open, dining out is prohibited. More residents would be staying at home as a result of work from home measures and school closures. We believe this would raise the demand for food at home and support supermarket sales for the month of April.
• On the ground, we have also seen many empty shelves in the several supermarkets as a result of the panic buying following the circuit breaker measures.

Expect supermarket sales to remain resilient after 4 May.

• We believe the stay home measures would only be eased in stages even after the 4- week circuit breaker as a sudden surge of people going back to work and school could trigger another wave of viral contagion.
• While residents might rush to dine out after four weeks of cabin fever, we believe the increased proportion of employees continuing to work from home will keep supermarket sales resilient.

Sheng Siong is our preferred pick for the sector.

• We expect resilient sales for the grocery sector to prevail. Meanwhile, the enhanced Job Support Scheme and rental waivers from government agencies like the HDB should help defray additional costs from higher workloads, accommodation arrangements for foreign workers, and rising input costs from supply chain disruptions.
• See Sheng Siong Share Price; Sheng Siong Target Price; Sheng Siong Analyst Reports; Sheng Siong Dividend History; Sheng Siong Announcements; Sheng Siong Latest News.
• Key risks include a decline in market sentiment, while a prolonged lockdown may further increase input costs or cause food shortages.
• See also report:
  • Retail Staples - RHB Invest 2020-04-09: Remaining Resilient Amid COVID-19.
  • Dairy Farm - RHB Invest 2020-04-09: Positive On Groceries, Negative For Other Formats.

Juliana Cai RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-04-09

SGX Stock Analyst Report BUY MAINTAIN BUY 1.420 SAME 1.420