CGS-CIMB analyst Lim Siew Khee reiterated a Buy rating on Sheng Siong Group Ltd. (OV8 – Research Report) yesterday and set a price target of S$1.90.
Lim Siew Khee has given his Buy rating due to a combination of factors that highlight Sheng Siong Group Ltd.’s potential for growth. The company’s first quarter results for 2025 showed a 6% year-on-year increase in profit after tax and minority interest, slightly surpassing expectations. This growth was driven by strong sales from new store openings, despite the broader supermarket industry experiencing a decline. The company plans to open ten new stores in 2025, which is expected to enhance its market share and drive future earnings growth.
While there are concerns about rising operating costs due to labor constraints and initial expenses associated with new store openings, the analyst anticipates that operating leverage will improve from 2026 onwards. This outlook leads to an increase in earnings per share estimates for 2026 and 2027. The target price remains at S$1.90, reflecting a positive long-term view. Potential catalysts for re-rating include additional store tenders and government support for wage costs, although risks such as increased staff costs and competitive pricing pressures remain.
In another report released today, Phillip Securities also maintained a Buy rating on the stock with a S$1.89 price target.