SDS: Uptick bias

A reputable F&B bakery operator in Johor. SDS is primarily focuses on the manufacturing and distribution of bakery products under the brand names Top Baker and Daily. Additionally, the group operates 38 F&B outlets, ranging from standalone bakeries to cafes and combinations of both. In FY23, 62% of the group's revenue stemmed from its wholesale segment, catering to the mass market in West Malaysia and Singapore. This is facilitated by two manufacturing plants located in Johor and Negeri Sembilan. The remaining earnings was generated through the operation of F&B outlets.

Riding on the burgeoning vibrancy in Johor state. With 33 of its F&B outlets situated across Johor state, and a wholesale segment that is focusing in this region, SDS appears strategically positioned to leverage the burgeoning vibrancy in Johor, propelled further by the continuous influx of visitors from Singapore. This trend is supported by high-impact initiatives such as the Johor-Singapore Special Economic Zone and the special financial zone in Forest City. As noted by Prime Minister Anwar Ibrahim (link), Johor is primed for accelerated growth, potentially outpacing other Malaysian states. The population in Johor has steadily increased from 11.6% in 2019 to 12.3% of Malaysia’s total population, with expectations of further growth spurred by promising job opportunities and robust FDI, all of which augur well for SDS's sales.

Given the promising sales outlook in Johor state, the group intends to expand its retail footprint (targeting 3-5 new stores p.a.), particularly targeting urban areas in the Central and Southern regions of Peninsular Malaysia. This strategic move aims to capitalize on the influx of Singaporean shoppers and Malaysian residents who commute from Singapore, particularly those residing in Johor Bahru. This strategy has already been set in motion, as evidenced by the opening of three new retail outlets in FY23, all located within Johor state.

Uptick Bias. SDS is presently trading within its strong support region of RM0.75 (MA100)-RM0.78, with indicators showing uptick bias. A successful breakout above RM0.80 will spur the share price toward RM0.82-0.86-0.92. Cut loss at RM0.69.

Collection range: RM0.75-0.77-0.78

Upside targets: RM0.82-0.86-0.92

Cut loss: RM0.71

Source: Hong Leong Investment Bank Research - 23 Apr 2024