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Singapore Consumer Retail Staples - Shopaholic Hits The Grocery Stores

Shared By Stock Fanatic on Monday, May 21, 2018 | 21.5.18

Reiterate OVERWEIGHT, as we remain optimistic on the outlook for the year on improved consumer sentiment in Singapore. Sheng Siong is our Top Pick. Also, based on our recent grocery shopping trips, we note the tight competition amongst supermarket operators have led to much improvements in product range, store-front displays and self-checkout counters – thereby greatly improving the overall grocery shopping experience.

YoY growth outlook strengthened. Singapore’s consumer sentiment has been recovering on the back of improving job prospects and economic growth. We believe grocery expenditure would remain on an uptrend this year. During Sheng Siong’s recent analyst briefing, CFO Mr Wong Soong Kit highlighted that the group experienced higher transaction volumes and a slight improvement in basket sizes. We expect both trends to continue this year.

With an improved economic outlook and consumer confidence, consumers should trade up when buying groceries. This could be in the form of buying higher-quality or value-added products or more fresh foods. The recent surge in the completion of new Housing Development Board (HDB) flats could have triggered an increase in transaction volumes from these new households. Looking ahead, HDB still has about 10 new sites for supermarkets to tender until year-end. This provides a strong pipeline of growth for grocery retailers, as we believe sales could be absorbed by stronger demands from new housing estates.

A better shopping experience. The grocery retailing scene remains highly competitive, especially with online players coming into this space. Our grocery shopping experience during the quarter suggests that brick-and-mortar players are putting in much more effort to differentiate themselves to retain customers:

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i. Sheng Siong. This low-cost supermarket player has proven to be adept in winning customers. In some of its new stores we visited, the company has caught up with the times with modern, cleaner and neater arrangements and shelf displays. Yet, at the same time, it maintained its brand to be synonymous with an “air-conditioned wet market”. While a major portion of its items are still fresh produce, these are now displayed in a more organised manner. It currently has the highest percentage of fresh mix in sales (44%) compared to other supermarket operators in Singapore – which makes it quite resilient against online players;

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ii.Dairy Farm. While we think Giant stores pale in comparison over its low-cost peer, Sheng Siong, our recent channel checks show that significant effort has been made to revamp the upmarket brand, Cold Storage. The new Cold Storage is emulating the company’s 7-Eleven franchise and China associate, Yonghui Superstores, to provide more ready-to-eat food and a dining experience within their premises. The range of products has also been widened and wine tasting is available at some of the stores.

Maintain OVERWEIGHT. We remain optimistic on the sector outlook, as grocery retailers would benefit from the pick-up in broad-based demand in Singapore. Furthermore, with operators using innovative ways and new ideas to create a differentiated shopping experience from e-commerce players, we could see a continued uptick in foot traffic and basket size in 2018.

Source : RHB Research
(Read Report)

Posted on Monday, May 21, 2018 | 21.5.18
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