Best World International | Buy
Dec 6 close: S$1.24
Target price: S$1.88
Broker: Maybank Kim Eng Research, Dec 4
We hosted Best World for a non deal roadshow in Singapore. Best World has set an ambitious goal to reach 5 per cent market share or 10 billion yuan (S$2.04 billion) of China's 193 billion yuan skincare market, from less than one per cent this year.
It will continue to drive sales via expansion into more cities and focus on its 3P (product, people, plan) winning strategies. It is tapping digitalisation and social media, such as WeChat and Facebook to enhance its sales. It is expanding into new markets and restoring its Taiwan market.
Maintain "buy" and target price of S$1.88, based on 19 times 2018 estimated earnings (PEG or price earnings to growth ratio of 0.7 time using 2016-19 estimated earnings compound annual growth rate of 27 per cent).
We ascribed a 30 per cent discount to the PEG of one time for regulatory risks and competition.
Tiong Seng Holdings | Not rated
Dec 6 close: S$0.395
Target price: S$0.45
Broker: DBS Group Research, Dec 5
Tiong Seng is a construction and civil engineering company in Singapore, and a niche real estate developer in China.
With Singapore's private residential property market turning around and collective sales picking up, Tiong Seng is well placed to capitalise on winning more projects from potential tenders from developers.
Our fair value of Tiong Seng is $0.45 pegged to 6.6 times 2018 forecast earnings and 0.6 time book value.
Competition, lower tender prices and a slow pace of projects are key earnings risks.
Singapore consumer | Overweight
Broker: Phillip Securities Research, Dec 4
We remain "overweight" on the Singapore consumer sector.
After three lacklustre years, we expect the present rebound in economic conditions to continue and filter down to better consumer sentiment.
We have "buy" ratings on both supermarkets, Sheng Siong (target: S$1.13) and Dairy Farm (target: US$9.89).
They have their own fresh distribution warehouses in Singapore, allowing them to ramp up fresh offerings as well as to tap on economies of scale. Fresh products are less vulnerable to Amazon's threat.
Improving operating efficiencies will support their profitability and make them more resilient and sustainable.
In addition, they are also expanding their stores network, bringing their presence closer to consumers.
On the food and beverage segment, we have a "buy" on home-grown curry puff chain Old Chang Kee (target: S$0.98), and the dominant spirits manufacturer Thai Beverage (target: S$1.18), as well as an "accumulate" on Fraser & Neave (target: S$2.83).
Food and beverage manufacturers could collaborate with online intermediaries, to complement their existing distribution network.
For example, Old Chang Kee is engaging Foodpanda for delivery services, while products of Thai Beverage and F&N are available on Lazada, Redmart, and Amazon Prime.