Why Sheng Siong is urged to revamp older stores asap

Its big rival Dairy Farm may stage a comeback next year.

As the competitive scene for the local grocery sector is set to intensify, Sheng Siong Group should step up its game to keep up with its rivals.

According to OCBC, one of its rivals, Dairy Farm International, may make a comeback next year as new concept players such as Global Halal Hub are expected to expand their presence locally.

Sheng Siong could also face threats from e-commerce players, OCBC noted.

"We reiterate that it is not easy to reach the desired scale required for most players here,
thus we like that the group is prudent in their e-commerce plans," the brokerage firm said.

OCBC pointed out that the group could up its game by renovating older stores which can yield promising sales growth.

"In addition to nine new stores as the key growth driver, the group can also renovate older stores that typically would boost sales growth, and we expect operating margins to be sustainable," OCBC said.

It added, “In view of the above, we reviewed our estimates and raised our EPS estimates slightly, as well as updated assumptions for our DCF (discounted cash flow) model, thus our fair value estimate increases from S$1.07 to S$1.15.”