[ET Net News Agency, 6 February 2018] Morgan Stanley lifted its target price for Sun
Art Retail Group (06808) to HK$12 from HK$7.6, and maintained its "overweight" rating.
The research house said the stock's year-to-date rally appears to be driven by
expectation of higher CPI and several industry events, rather than Sun Art's new retail
initiatives.
Looking past current stock volatility, Morgan thinks the B2B and O2O businesses,
reinforced by partnership with Alibaba, will get Sun Art growing again.
Morgan now expect its online operation to make profits by 2019, mainly driven by
fast-growing B2B. It thinks momentum in O2O (one-hour delivery) will accelerate after more
technological input and online traffic provided by Alibaba.
It is more positive on Sun Art's store-based e-commerce and hence it raised sales and
net income estimates for 2018-19. Morgan expects in-store SSSG (ex. B2B+O2O) to improve in
2018 thanks to broad-based price hikes in FMCG, despite pricing of fresh produce remaining
lukewarm. Overall, it expects 8% sales and 13% net income CAGR for 2017-19. (KL)