Sheng Siong’s threat is edging nearer than you think

SINGAPORE (Sept 16): UOB Kay Hian is initiating coverage on Sheng Siong Group (SSG) with a “hold” and target price of $1.13 given that the stock price is reflecting all the positive views at current levels. Long term though, SSG’s will face higher competition from e-commerce players and lack of domestic growth opportunities.

In a Friday report, lead analyst Nicholas Leow says online grocery suppliers like AmazonFresh and Redmart may not remain a niche play for long. These online retailers present a clear threat to brick and mortar players like SSG as they do not face the constraints of space, size and location nor are they as severely impacted by rising rent and staff cost.

“These disruptors are able to offer an unlimited product selection and operate with a structural advantage. We believe online grocery suppliers provide customers a completely different value proposition,” says Leow.

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