Singapore Grocery Retail - DBS Research 2020-04-15: F&B Foodservices Give Way To Supermarket Sales

Singapore Grocery Retail - DBS Research | SGinvestors.io DAIRY FARM INT'L HOLDINGS LTD (SGX:D01) SHENG SIONG GROUP LTD (SGX:OV8)

Singapore Grocery Retail - F&B Foodservices Give Way To Supermarket Sales

  • We overweight ASEAN grocery retailers as COVID-19 triggers a regional shift of food consumption to homes.
  • Robust demand for regional grocery sales expected as governments advise consumers to stay home.

Singapore – F&B foodservices give way to supermarket sales

  • New COVID-19 measures bode well for supermarkets and mass-market foodservices. With the circuit breaker measures announced, non-essential workplaces have been ordered to close from 7 April to 4 May to help contain the spread of COVID-19. Food establishments and hawkers will remain open but only for takeaway or delivery services. This is positive for supermarkets and affordable mass-market foodservices outlets. As people are encouraged to stay home as far as possible, we expect retail spending on food staples to strengthen further.

Fewer people out and about in Singapore.

  • The Singapore government has reported that transport ridership and traffic volume has fallen by more than 70% since the start of the Circuit Breaker, with close to 80% of the workforce now working from home. There are reportedly fewer people outside as well, with 30-40% of individuals out on weekdays and only 20-30% out on the weekends.
  • Supermarket sales to continue to be brisk after strong showing in February. Retail sales in February declined by 8.6% y-o-y (-10.2% excluding motor-vehicles). Supermarkets bucked the trend, growing strongly by 15.5% y-o-y.
  • Discretionary sales plunged, with sales for watches & jewellery, department stores, and apparel & footwear falling by 23-41% y-o-y.

Closure of workplaces and schools to increase demand for food at home.

  • We see a stronger shift of food consumption at workplaces and schools to homes during the next month. This will result in brisk sales at grocery retailers, F&B foodservice outlets near residential areas, and online channels. On the other hand, this is a bane for restaurant operators as a significant portion of Singapore’s workforce stay away from their workplaces.

Reiterate BUY on supermarket plays and avoid restaurants.

  • We reiterate our positive stance on supermarkets and BUY recommendations on Sheng Siong (SGX:OV8) and Dairy Farm (SGX:D01), while avoiding higher-end restaurant operator Jumbo Group (SGX:42R).
  • Earnings risks prevail for Koufu (SGX:VL6) as its outlets at Marina Bay Sands and Macau are reliant on tourists, even though footfall at heartlands continues to be decent.
  • For BreadTalk Group (SGX:CTN), we urge shareholders to accept the offer given that about half of operating profit is from the Din Tai Fung restaurant franchises in Singapore, Thailand and the UK.

See attached PDF report for peer comparison and also analysis on grocery retail stocks of Malaysia, Thailand & Indonesia.

Alfie YEO DBS Group Research | Andy SIM CFA DBS Research | https://www.dbsvickers.com/ 2020-04-15
SGX Stock Analyst Report BUY MAINTAIN BUY 5.59 UP 4.700