Maybank initiates coverage on Sheng Siong with ‘buy’ call on DFI sale of Singapore supermarkets
Rival DFI’s S$125 million sale of Singapore Cold Storage, Giant grocers may allow Sheng Siong to gain market share
[SINGAPORE] Maybank has initiated coverage on supermarket operator Sheng Siong, assigning it a “buy” call and a target price of S$2.30.
This represents a premium of 10.6 per cent over its last closing price of S$2.08 on Friday and implies a price-to-earnings ratio of 23 times for 2025 and 21 times for 2026.
In a report on Sunday (Jun 20), Maybank analyst Hussaini Saifee wrote: “Rival DFI Retail Group’s S$125 million sale to Malaysia’s Macrovalue signals a retreat from Singapore’s supermarket space and, in our view, creates a market share opportunity for Sheng Siong.”
Jardine Matheson-owned DFI had in March announced the sale of its Singapore food business, including 48 Cold Storage and 41 Giant stores, to the Malaysian conglomerate.
Sheng Siong’s revenue could log a 6 per cent compound annual growth rate (CAGR) on the back of industry growth of 4 per cent and market share gains from its competitor’s restructuring, Saifee wrote.
The group’s net profit after tax is estimated to grow at a CAGR of 8 per cent, which is “highly defensible” and places it in the upper-tier of domestic names and regional peers, he added.
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Market share opportunity on DFI retreat
The ongoing restructuring of Sheng Siong’s competitors, amid Macrovalue’s takeover of DFI’s Cold Storage and Giant stores, presents an opportunity for “medium-term growth in market share”, Saifee wrote.
“In the past three years, Sheng Siong has gained 2.7 percentage points in revenue share and could benefit further if Macrovalue prioritises Cold Storage over Giant due to capital constraints,” he wrote.
Giant’s focus on the mass market segment would mean that its ongoing rationalisation would likely benefit Sheng Siong, which targets a similar customer base, he added.
“Our mapping shows a 68 per cent chance of Sheng Siong gaining over NTUC from potential Giant closures,” Saifee said.
This comes as Sheng Siong remains focused on expansion, with the group opening six to 10 stores over 2024 and 2025, he said.
“We expect Sheng Siong to add five to six new stores in 2026 to 2027, partially helped by (Giant’s) rationalisation.”
Limited leakage from e-grocery competition
Saifee noted that leakage from competition posed by online grocers should be “limited”.
He noted that Singapore’s e-grocery market is already mature (with) 80 per cent of residents already (shopping) online, limiting further structural shifts.
Moreover, offline groceries have been predicted to grow at a CAGR of 3 per cent for 2024 to 2029, matching gross domestic product, he said.
“The city’s compact layout supports in-person shopping. Sheng Siong’s prices are 10 per cent to 21 per cent lower than e-grocers, and its fresh offerings, live seafood, and long hours drive footfall.”
Additionally, food trends such as consumers cutting back on delivery due to higher costs should support the stable growth of supermarkets, he said.
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