Skip to content
Alpha Edge Investing

Alpha Edge Investing

"Investors operate with limited funds and limited intelligence, they don’t need to know everything. As long as they understand better than others, they have an edge.” – George Soros

  • Home
  • Earnings Updates/ Corporate Actions
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trust/ ETF
  • News
  • My Opinions/ Views
  • Others
  • About Me
  • Contact
  • Disclaimer
  • Community and Support Forums
  • Toggle search form

DBS: Singapore Retail Real Estate

Posted on October 20, 2022October 20, 2022 By alanyeo No Comments on DBS: Singapore Retail Real Estate
Singapore Retail: Preparing for the turn of the retail tide
  • Higher inflation and impending recession to shroud retail spending outlook in coming quarters
  • Analysis of past 4 recessions shows that general retail index generally retreats c.13% – 19% from peak to trough with a 2-quarter lag compared to GDP
  • Sectors that saw the dip and demonstrated tenant stickiness proved to be food courts & cafes, fast food outlets, convenience stores
  • Picks to prepare for a turn of tide: SSG for supermarket exposure, FCT and LREIT as a proxy to suburban retail and necessity spending with 100% / 47% exposure

Looking at economic downturns for clues of how “consumer stretch their dollar”. While retail sales data in 2022 continue to rebound strongly on the back of reopening optimism, we see momentum slowing, with sticky inflation and slower economic growth prospects weighing on consumer confidence in 2023. Our analysis of the performance during the past four recessions (over 1997 – 2022) generally saw a 13% – 19% peak to trough dip in the general retail index with sectors focused on necessity spending showing relative resilience. Our recent consumer survey indicated that consumers will “stretch their dollar” and focus on essential goods, highlighting our confidence that essential goods will outperform in the face of economic adversity. We notice retail sub-categories such as “food courts & cafes, fast food and minimart & convenience stores” showed the smallest volatility and lags the decline in retail sales by c.2 quarters through past downturns. On this front, we believe that suburban focused retail landlords FCT and LREIT, and retailer Sheng Siong, will be relative outperformers come 2023. 

Sheng Siong Group remains our top consumer pick to ride out the tides of recession. We like Sheng Siong Group (SSG) as the third-largest supermarket operator in Singapore in times of recession. We believe should household income come under stress, affordability will become key. SSG’s value grocery offerings would likely see increased demand, driving top-line growth. We maintain BUY, with our target price at S$1.76 with a yield of almost 4%.

Suburban retail landlords as proxy for necessity spending. We believe the suburban retail landscape will continue to deliver resilience in the face of economic uncertainty as consumer purchasing substitution will shift spending toward essential items, which are key exposures for landlords like FCT and LREIT with their purer exposure in the suburban landscape. Both stocks yield an attractive forward FY23 yield of 6.4% and 7.3%, respectively, and are offering yields close to multi-year highs. 

sgreit_inflation-report-19oct2022Click here to Download Full Report in PDF

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Telegram (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)
Research - Equities Tags:Frasers Centrepoint Trust, Lendlease Global Commercial REIT, Sheng siong, Singapore Macro, Singapore Strategy, SPH REIT

Post navigation

Previous Post: DBS: SEA Ltd – Buy Target Price US$100.00 (Previous US$126.00)
Next Post: DBS: ASEAN Internet & Consumer Sectors

Related Posts

CIMB: Lendlease Global Commercial REIT – Add Target Price $0.88 (Previous $1.02) Research - Equities
DBS: LendLease Global Commercial REIT – Buy Target Price $1.00 Research - Equities
DBS: LendLease Global Commercial REIT – Buy Target Price $1.10 Research - Equities
DBS: ASEAN Internet & Consumer Sectors Research - Equities
CIMB: Singapore Economics Update Research - Equities
DBS: SPH REIT – Hold Target Price $0.96 Research - Equities
CIMB: SPH REIT – Hold Target Price $0.96 (Previous $0.95) Research - Equities
UOBKH: REITs – Singapore (Overweight) Research - Equities
UOBKH: Singapore Monthly Review and Outlook Research - Equities
UOBKH: STRATEGY – SINGAPORE Research - Equities
PhillipCapital: Phillip 4Q22 Singapore Strategy Hibernating for winter Research - Equities
UOBKH: Singapore REITs (Overweight) Research - Equities

Leave a Reply

You must be logged in to post a comment.

Login

Log In
Register Lost Password
Get new posts by email
Chat on WhatsApp
  • Earnings Updates/ Corporate Actions
  • My Opinions/ Views
  • News
  • Others
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trusts/ ETF

Copyright © 2023 Alpha Edge Investing.

Powered by PressBook Grid Blogs theme