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:
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