Singapore Downstream Consumer - DBS Research 2020-05-18: Will We See A Spending Shift Post CB?

Singapore Downstream Consumer - DBS Research | SGinvestors.io SHENG SIONG GROUP LTD (SGX:OV8) DAIRY FARM INT'L HOLDINGS LTD (SGX:D01) KOUFU GROUP LIMITED (SGX:VL6) JUMBO GROUP LIMITED (SGX:42R)

Singapore Downstream Consumer - Will We See A Spending Shift Post CB?

  • Circuit Breaker measures are on track to ease in June; expect cautious outlook on consumer spending.
  • Anticipate slow earnings recovery for retailers.
  • Some relief for F&B Foodservice as they continue to face pressure from lack of dine-in customers and tourists.
  • Still favour supermarket plays Sheng Siong (SGX:OV8) and Dairy Farm (SGX:D01).



Cautious outlook on consumer spending.

  • The Circuit Breaker has confined most of the population to their homes with a positive impact on supermarket sales and negative on F&B Foodservices. With the Circuit Breaker on track to ease in June, we anticipate recovery in the F&B Foodservice segment to be slow and gradual since social distancing will still be practiced as a precaution.


Recovery in retail sales likely to be weak as well.

  • We expect recovery scenario to be slow and steady, requiring time for consumption to normalise to pre-COVID-19 levels. We see a measured and gradual easing of Circuit Breaker restrictions, with social distancing still practise as a precaution. Footfall is likely to be muted and not all businesses will have all workers back onsite when movement restrictions start to ease.


Footfall improvement not expected to excite.

  • Recovery will depend on trading patterns of buyers and sellers. Since online forms only 8.5% of total retail sales in Singapore, a lot depends on how many retailers would be allowed reopen their outlets. Social distancing and limits on number of customers in stores are footfall dampeners.


Food and essential items to benefit from higher footfall.

  • Sales of non-essential merchandise retailers may take a while to recover as operational restrictions remain in place. As long as some of the Circuit Breaker restrictions remain, grocery retailers will continue to be the key beneficiary of retail sales for now.
  • F&B Foodservice sales should recover as well but the pace will be slow as footfall will be affected by lack of dine-in customers and tourists.
  • See attached PDF report for complete analysis.


We continue to like Sheng Siong and Dairy Farm


Maintain BUY for Sheng Siong (SGX:OV8).


Maintain BUY for Dairy Farm (SGX:D01).


Underweight F&B Foodservice.

  • Even though food demand is expected to improve for F&B Foodservice as measures start to ease, we do not expect F&B Foodservice consumption to normalise as not all of the workforce and consumers would go out as a precaution. We reasonably do not expect footfall to normalise quickly to pre-COVID-19 levels. Underweight F&B Foodservices especially those that thrive on commensality and dine-in customers, which would take a longer time to recover.

Downgrade Jumbo Group (SGX:42R); to FULLY VALUED, Target Price S$0.21.

  • We have turned negative on Jumbo as we anticipate slower recovery ahead and weaker earnings estimates for FY20-21F. Our recovery scenario assumes a measured and gradual easing of circuit breaker restrictions, with social distancing still practiced as a precaution, and a slow return of tourists to Singapore.
  • We have cut our FY20-21F earnings estimates to reflect these assumptions. Based on the current run rate of the business offset by government support schemes, our previous FY20F earnings projection of S$4.4m appears too optimistic. With 1HFY20’s earnings disappointment a further validation of poor earnings traction, we downgraded the stock to FULLY VALUED considering its rich valuation of 21x FY21F PE. See report: Jumbo Group - DBS Research 2020-05-15: Commensality On Hold.
  • Besides, with its tourism exposure, we believe share price could lag the market even when the current pandemic blows over. Jumbo’s strong balance sheet and 5 Scts net cash as of March 2020 (c. 20% of market cap) should help the Group weather through this storm.
  • See Jumbo Group Share Price; Jumbo Group Target Price; Jumbo Group Analyst Reports; Jumbo Group Dividend History; Jumbo Group Announcements; Jumbo Group Latest News.





Alfie YEO DBS Group Research | Andy SIM CFA DBS Research | https://www.dbsvickers.com/ 2020-05-18
SGX Stock Analyst Report BUY MAINTAIN BUY 1.660 SAME 1.660
BUY MAINTAIN BUY 5.100 SAME 5.100
HOLD MAINTAIN HOLD 0.680 SAME 0.680
FULLY VALUED MAINTAIN FULLY VALUED 0.210 SAME 0.210



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