Tuesday, December 24, 2013

S'pore Consumer -Powered By Regional Growth

 Consumer -Powered By Regional Growth

We are positive on Singapore’s consumer companies in 2014 as they will likely benefit from the region’s growing consumption. Given the > 30% returns YTD November, we continue to like specialty retailers Eu Yan Sang and OSIM for their North Asia exposure. We also like Parkson Retail Asia, Sheng Siong and Super Group following their recent share price declines, which have made their risk-reward profiles appealing.

¨ Mixed returns YTD. For 11M2013, our coverage returned an average of +6%, led by strong performances of +37% and +31% from specialty retailers Eu Yan Sang (EYSAN SP, BUY, FV: SGD0.92) and OSIM (OSIM SP, BUY, FV: SGD2.60) respectively. On the other hand, consumer discretionary players underperformed, with the share prices of FJ Benjamin (FJB SP, NEUTRAL, FV: SGD0.27) and Parkson Retail Asia (PRA SP, BUY, FV: SGD1.28) declining by 29% and 23% respectively.

¨ Beneficiaries of North Asia’s growth. Both EYSAN and OSIM saw improved sales in North Asia in their latest results. In 1QFY14, EYSAN posted profit of SGD1.4m (+318% y-o-y) as its Hong Kong-derived sales surged 26% to SGD37m, making up 46% of its 1Q revenue. The growing number of Chinese tourists lifted demand for the company’s Bo Ying Compound – a traditional Chinese remedy for paediatric discomfort – as well as other products. Similarly, OSIM reported 3Q13 net profit of SGD23m (+16% y-o-y) as its North Asia-derived revenue rose 8% to SGD81m, making up 53% of its total revenue.

¨ Improving valuations following recent declines. Meanwhile, the shares of PRA, Sheng Siong (SSG SP, BUY, FV: SGD0.74) and Super Group (SUPER SP, BUY, FV: SGD3.99) had declined by 19%, 8% and 20% over the past three months on earnings concerns. Nonetheless, we see their improving risk-reward trade-off and share price weakness presenting some good entry opportunities. Hence, we upgraded PRA and SUPER to BUY from Neutral in November. In addition, we still see a good risk-reward profile for SSG, which offers a dividend yield of 4.7%. Among the pack, EYSAN and OSIM remain our Top Picks for 2014.

Source/Extract/Excerpts/来源/转贴/摘录: DMG-Research,
Publish date: 23/12/13

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