Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

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Dairy Farm, Sheng Siong, BreadTalk and Old Chang Kee averaged a 0.3% gain for the first week of 2019, following average total returns of 10% in 2018 and 14% in 2017. The average annualised 5-year total returns of the four stocks is 10%. 
	 </li>
	<li>
The primary business of the four stocks is to sell food to consumers. Combined, the four stocks have averaged ROE of 19% over the past 12M and were recipients of S$121 million in institutional net inflow in 2018. 
	 </li>
	<li>Across APAC, Food Retailers and Wholesalers are represented by less than 200 stocks, with Dairy Farm amongst the five largest capitalised stocks of this group. Dairy Farm joined the MSCI Hong Kong Index in June 2018 and the STI in Sept 2018.</li>
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Singapore’s four Food Retailers - Dairy Farm International Holdings (“Dairy Farm”), Sheng Siong Group, BreadTalk Group and Old Chang Kee all operate a chain of stores that sell food to consumers. The two larger stocks, Dairy Farm, Sheng Siong Group operate supermarket chains, whilst BreadTalk Group and Old Chang Kee operate stores that sell prepared food to consumers. The stocks maintain other business lines, however the supermarkets and food stores generate the most revenue for these four businesses, hence their categorisation to Food Retailing. 

Regionally there are less than 200 stocks that make up this subsector, and on an average and median basis, these stocks declined across Asia Pacific in 2018.  In Singapore, however the relevant four stocks averaged a 10.0% total return in 2018, ranging from a 20.5% gain for Dairy Farm International to a 1.6% decline for BreadTalk Group.  While BreadTalk Group was the only stock of the four Food Retailers to decline in 2018, it was the strongest of the four stocks in 2017 with a 52.1% total return.

The average performances of the four stocks are illustrated below.
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 <img src="https://api2.sgx.com/sites/default/files/2019-01/123_0.PNG" alt="Food retailer returns">
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 <div class="content-caption">Food retailer returns</div>
Dairy Farm Joined Multiple Benchmarks in 2018 

The capitalisation of three of the four stocks is large enough that they qualify to be constituents of the FTSE ST All Share Index. Monthly updates for the FTSE ST All Share Index and the FTSE ST Food &amp; Drug Retailers Index can be followed in the FTSE Asia Monthly Reports found <a href="https://www.ftse.com/Analytics/factsheets/Home/Search">here</a>.  Dairy Farm also joined the MSCI Hong Kong Index effective 1 June 2018 and the Straits Times Index (“STI”)  effective 24 September 2018.

Sheng Siong Group Led Food Retailer Institutional Inflows in 2018

The four stocks were recipients of S$121.1 million in institutional net inflow in 2018. Sheng Siong Group led the tally and was the recipient of S$96.3 million of institutional net inflows, followed by Dairy Farm which saw S$33.2 million in net institutional inflow. Smaller flows were observed in BreadTalk Group, which saw S$8.6 million in outflow and Old Chang Kee which saw S$0.3 million in inflow. Overall, institutions were net sellers of Singapore equities with S$1.5 billion in outflow in 2018.

All Four Food Retailers Have International Operations

<ul>
<li>As noted in previous Market Updates, Dairy Farm’s supermarkets and convenience stores are located across ASEAN and Greater China. 
	 </li>
	<li>
Sheng Siong Group opened its first overseas store in Kunming, China in 2017. As noted in its 3QFY18 report its subsidiary in China recorded a loss of $0.4 million for 3Q2018 and $0.5 million for 9M2018, but was EBITDA positive. Sheng Siong Group added that revenue grew steadily since the commencement of operation and that gross margin was lower in China, but its impact on the Group is insignificant. 
	 </li>
	<li>Last week BreadTalk Group and Song Fa Holdings announced it would open its first restaurant in Beijing APM Mall (click <a href="http://breadtalk.listedcompany.com/news.html/id/695193">here</a> for more). In addition to the bakery outlets across Singapore, as of 30 Sep, the bakery segment of BreadTalk Group maintained 241 franchise outlets in China, 194 in Indonesia, 55 Philippines and 51 in Thailand , in addition to 75 outlets across other countries. 
	 </li>
	<li>Last year Old Chang Kee opened its first British outpost at 15A New Row, Covent Garden, in London. This added to its more than 100 food outlets across Singapore, Malaysia, Indonesia and Australia. In August last year, Old Chang Kee featured in the Enterprise Singapore Inspiring stories series found <a href="https://www.enterprisesg.gov.sg/inspiring-stories/old-chang-kee">here</a>. </li>
</ul>
Food Retailers ROE’s Consistently Averaged 19% in Recent Years 

Combined, the four stocks have averaged Return on Equity (“ROE”) of 19% over the past 12 months. These ROEs range from 26.6% for Sheng Siong Group to 7.4% for BreadTalk Group. All four stocks maintain ROEs that are above the average and median ROEs of the Food Retailers and Wholesalers listed across Asia Pacific.

The ROEs of the four Food Retailers have shown a degree of consistency over the past five years,  with five year average ROEs also near 19%. ROE  measures a corporation's profitability by revealing how much earnings a business generates with the money that its shareholders have invested.

The table below details the recent performances of the four stocks.

<table class="table table-striped"><tbody>
<tr>
<td>
			Foods Retailers
			</td>
			<td>
			SGX Code
			</td>
			<td>
			Market Cap S$M
			</td>
			<td>
			ROE LTM (%)
			</td>
			<td>
			2017 Total Return (%)
			</td>
			<td>
			2018 Total Return (%)
			</td>
			<td>
			2019 YTD Total Return (%)
			</td>
			<td>
			5 year Annualised Total Return (%)
			</td>
		</tr>
<tr>
<td>
			Dairy Farm Intl Hldgs
			</td>
			<td>
			D01
			</td>
			<td>
			16,726
			</td>
			<td>
			25.7
			</td>
			<td>
			3.5
			</td>
			<td>
			20.4
			</td>
			<td>
			0.3
			</td>
			<td>
			3.3
			</td>
		</tr>
<tr>
<td>
			Sheng Siong Group
			</td>
			<td>
			OV8
			</td>
			<td>
			1,609
			</td>
			<td>
			26.6
			</td>
			<td>
			1.4
			</td>
			<td>
			18.4
			</td>
			<td>
			0.9
			</td>
			<td>
			16.0
			</td>
		</tr>
<tr>
<td>
			BreadTalk Group 
			</td>
			<td>
			CTN
			</td>
			<td>
			459
			</td>
			<td>
			7.4
			</td>
			<td>
			52.1
			</td>
			<td>
			-1.6
			</td>
			<td>
			-0.6
			</td>
			<td>
			15.1
			</td>
		</tr>
<tr>
<td>
			Old Chang Kee 
			</td>
			<td>
			5ML
			</td>
			<td>
			93
			</td>
			<td>
			17.7
			</td>
			<td>
			-2.4
			</td>
			<td>
			2.6
			</td>
			<td>
			0.7
			</td>
			<td>
			3.8
			</td>
		</tr>
<tr>
<td>
			Average:
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			19.4
			</td>
			<td>
			13.6
			</td>
			<td>
			10.0
			</td>
			<td>
			0.3
			</td>
			<td>
			9.5
			</td>
		</tr>
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Source: SGX Stockfacts, Thomson Reuters, Bloomberg (Data as of 4 January 2019)
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Dairy Farm, Sheng Siong, BreadTalk and Old Chang Kee averaged a 0.3% gain for the first week of 2019, following average total returns of 10% in 2018 and 14% in 2017. The average annualised 5-year total returns of the four stocks is 10%. 
	 
	
The primary business of the four stocks is to sell food to consumers. Combined, the four stocks have averaged ROE of 19% over the past 12M and were recipients of S$121 million in institutional net inflow in 2018.  
	 
	Across APAC, Food Retailers and Wholesalers are represented by less than 200 stocks, with Dairy Farm amongst the five largest capitalised stocks of this group. Dairy Farm joined the MSCI Hong Kong Index in June 2018 and the STI in Sept 2018.

Singapore’s four Food Retailers - Dairy Farm International Holdings (“Dairy Farm”), Sheng Siong Group, BreadTalk Group and Old Chang Kee all operate a chain of stores that sell food to consumers. The two larger stocks, Dairy Farm, Sheng Siong Group operate supermarket chains, whilst BreadTalk Group and Old Chang Kee operate stores that sell prepared food to consumers. The stocks maintain other business lines, however the supermarkets and food stores generate the most revenue for these four businesses, hence their categorisation to Food Retailing. 

Regionally there are less than 200 stocks that make up this subsector, and on an average and median basis, these stocks declined across Asia Pacific in 2018.  In Singapore, however the relevant four stocks averaged a 10.0% total return in 2018, ranging from a 20.5% gain for Dairy Farm International to a 1.6% decline for BreadTalk Group.  While BreadTalk Group was the only stock of the four Food Retailers to decline in 2018, it was the strongest of the four stocks in 2017 with a 52.1% total return.

The average performances of the four stocks are illustrated below.

      
    
    Food retailer returns
Dairy Farm Joined Multiple Benchmarks in 2018 

The capitalisation of three of the four stocks is large enough that they qualify to be constituents of the FTSE ST All Share Index. Monthly updates for the FTSE ST All Share Index and the FTSE ST Food &amp; Drug Retailers Index can be followed in the FTSE Asia Monthly Reports found here.  Dairy Farm also joined the MSCI Hong Kong Index effective 1 June 2018 and the Straits Times Index (“STI”)  effective 24 September 2018.

Sheng Siong Group Led Food Retailer Institutional Inflows in 2018

The four stocks were recipients of S$121.1 million in institutional net inflow in 2018. Sheng Siong Group led the tally and was the recipient of S$96.3 million of institutional net inflows, followed by Dairy Farm which saw S$33.2 million in net institutional inflow. Smaller flows were observed in BreadTalk Group, which saw S$8.6 million in outflow and Old Chang Kee which saw S$0.3 million in inflow. Overall, institutions were net sellers of Singapore equities with S$1.5 billion in outflow in 2018.

All Four Food Retailers Have International Operations


As noted in previous Market Updates, Dairy Farm’s supermarkets and convenience stores are located across ASEAN and Greater China. 
	 
	
Sheng Siong Group opened its first overseas store in Kunming, China in 2017. As noted in its 3QFY18 report its subsidiary in China recorded a loss of $0.4 million for 3Q2018 and $0.5 million for 9M2018, but was EBITDA positive. Sheng Siong Group added that revenue grew steadily since the commencement of operation and that gross margin was lower in China, but its impact on the Group is insignificant. 
	 
	Last week BreadTalk Group and Song Fa Holdings announced it would open its first restaurant in Beijing APM Mall (click here for more). In addition to the bakery outlets across Singapore, as of 30 Sep, the bakery segment of BreadTalk Group maintained 241 franchise outlets in China, 194 in Indonesia, 55 Philippines and 51 in Thailand , in addition to 75 outlets across other countries. 
	 
	Last year Old Chang Kee opened its first British outpost at 15A New Row, Covent Garden, in London. This added to its more than 100 food outlets across Singapore, Malaysia, Indonesia and Australia. In August last year, Old Chang Kee featured in the Enterprise Singapore Inspiring stories series found here. 

Food Retailers ROE’s Consistently Averaged 19% in Recent Years 

Combined, the four stocks have averaged Return on Equity (“ROE”) of 19% over the past 12 months. These ROEs range from 26.6% for Sheng Siong Group to 7.4% for BreadTalk Group. All four stocks maintain ROEs that are above the average and median ROEs of the Food Retailers and Wholesalers listed across Asia Pacific.

The ROEs of the four Food Retailers have shown a degree of consistency over the past five years,  with five year average ROEs also near 19%. ROE  measures a corporation's profitability by revealing how much earnings a business generates with the money that its shareholders have invested.

The table below details the recent performances of the four stocks.




			Foods Retailers
			
			
			SGX Code
			
			
			Market Cap S$M
			
			
			ROE LTM (%)
			
			
			2017 Total Return (%)
			
			
			2018 Total Return (%)
			
			
			2019 YTD Total Return (%)
			
			
			5 year Annualised Total Return (%)
			
		


			Dairy Farm Intl Hldgs
			
			
			D01
			
			
			16,726
			
			
			25.7
			
			
			3.5
			
			
			20.4
			
			
			0.3
			
			
			3.3
			
		


			Sheng Siong Group
			
			
			OV8
			
			
			1,609
			
			
			26.6
			
			
			1.4
			
			
			18.4
			
			
			0.9
			
			
			16.0
			
		


			BreadTalk Group 
			
			
			CTN
			
			
			459
			
			
			7.4
			
			
			52.1
			
			
			-1.6
			
			
			-0.6
			
			
			15.1
			
		


			Old Chang Kee 
			
			
			5ML
			
			
			93
			
			
			17.7
			
			
			-2.4
			
			
			2.6
			
			
			0.7
			
			
			3.8
			
		


			Average:
			
			
			 
			
			
			 
			
			
			19.4
			
			
			13.6
			
			
			10.0
			
			
			0.3
			
			
			9.5
			
		

Source: SGX Stockfacts, Thomson Reuters, Bloomberg (Data as of 4 January 2019)



Food Retailers Extended Gains in 2018       