Here’s why analysts think Sheng Siong is recession-proof

A trio of factors keep the supermarket chain steady.

The supermarket chain is as good as it gets for Singapore’s embattled consumer sector, with analysts saying the firm is technically a safe haven, given the strong majority shareholding, its defensive business, and healthy dividends.

According to analysts from RHB Research, Sheng Siong has a resilient business, and would thrive during recessions.

“In our recent trip to various supermarkets in Singapore, we noticed that there may be some trading down by higher-segment consumers, ie expatriates to NTUC FairPrice from Cold Storage and working professionals to Sheng Siong from NTUC FairPrice. This is common during poor economic conditions,” RHB Research said.

RHB adds that Sheng Siong is essentially the most competitive supermarket chain in Singapore, and is perfectly able to maintain healthy margins.

Meanwhile, more upsides are in store for Sheng Siong’s new stores this year, according to RHB Research.

“We believe the rental environment is currently conducive to Sheng Siong, given the weak consumer demand. Management is optimistic about securing new stores in 2016, given the bumper crop of 61,000 new Housing and Development Board (HDB) flats to be completed over 2H15-2017. Given the long-term nature of HDB estate leases, this could potentially help the company secure a next leg of growth,” they added.

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