Broker's report: OSK-DMG keeps buy call on supermarket operator Sheng Siong

SINGAPORE - Supermarket chain operator Sheng Siong has continued to garner positive reviews from brokerage OSK-DMG.

Issuing a report on the third largest supermarket player on Friday, OSK-DMG said the firm offers resilient growth despite a challenging operating environment.

The brokerage expects Sheng Siong to see improved sales growth and expanded gross profit margin as it embarks on new strategies that include changes in sales mix and operating hours.

By tweaking its sales mix and increasing its proportion of sales from fresh product rather than dry produce, as well as having more house brands compared with third-party vendor goods, Sheng Siong could see higher gross margins.

OSK-DMG also said the supermarket operator's move to open round-the-clock will increase revenue with marginal increase in costs.

It added that Sheng Siong is on an active lookout for retail spaces to open more stores, which could be a new driver of growth.

In keeping a buy call, the brokerage highlighted key risks like more intense pricing competition and lack of new locations for expansion, as it raised the target price to 83 cents from 74 cents.

Sheng Siong was last done at 68 cents as at 1.02pm on Friday, a fall of 2 cents. The Straits Times Index was down 29 points to 3,285.