Having taken into account revised growth and margins estimates, OCBC, in its June 23 note, has raised its fair value for this stock to $1.99 from $1.89.
Total retail sales for April was up 0.3% m-o-m, while retail sales in supermarkets and hypermarkets grew 1.7% y-o-y, reflecting stable demand for essential goods.
''Demand for groceries could be supported by a shift in consumption patterns towards a focus on value-for-money due to inflationary pressures and a higher cost of living,'' says OCBC.
"Moreover, grocery sales could be supported by Singapore Budget 2025’s announcement on inflation offset measures such as the CDC vouchers," says OCBC.
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OCBC notes that Sheng Siong's share price has gained 15% year to date, outperforming STI's 3%.
Sheng Siong in 1QFY2025 opened two new stores and has secured six more stores, out of which four were previously run by other supermarket chains that are scaling down. The company is bidding for another four stores.
The new stores are expected to commence operations from May through 3QFY2025, which puts it on track to open at least 8 new stores this year alone.
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"We believe Sheng Siong is expanding its market shares amid ongoing industry trend of store rationalisation," says OCBC.
Also, in a softer macroeconomic environment, OCBC expects an accelerated shift in consumption patterns towards a focus on value-for-money, which will favour Sheng Siong.
Sheng Siong shares traded at $1.89 as at 3.48 pm, unchanged for the day.
