STI : 3,053.77
Price Target: 12-Month S$0.80
Buy for yield
• Highest yielding stock among our Singapore consumer coverage universe at 4.9%
• Attractive dividend payout at 90% of earnings
• Yield of 4.9% lends supports to the share price
• Maintain BUY with S$0.80 TP
Met estimates despite earnings disappointment in the sector.
Unlike most of Singapore’s consumer stocks which failed to meet estimates, SSG’s 3Q13 results were on track. Growth was driven by contribution from new stores and better margins, despite weak SSSG of - 3.5% due to a decline in sales from matured stores in older housing estates, competitors’ promotions and renovation works at Bedok Central and The Verge stores. Gross and operating margins are now at record highs of 23.8% and 7% respectively, a result of lower input costs from centralised bulk purchasing and distribution, as well as better sales mix of fresh vs dried groceries.
Buy for yield. SSG is the highest yielding stock in our Singapore consumer coverage universe. It pays out 90% of earnings as dividends and its yield of 4.9% lends support to the share price. We believe the coming quarters will be flat, as store openings are likely to moderate.
Earnings to remain resilient. We expect earnings to remain resilient, sustained by strong margins and store sales. We see revenue growth supported by performance from new stores and newly refurbished ones. Store openings will likely be slow at < 5 p.a. going forward, as competition for retail space has become challenging.
Maintain BUY with S$0.80 TP. SSG’s share price is attractively priced at 18.2x FY14F PE. We maintain BUY, and S$0.80 TP based on 25x FY14F earnings.
Publish date: 18/12/13