Going for growth in groceries:: Macquarie Research,

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Going for growth in groceries
If you want some colour on China’s grocery store sector, there’s a kaleidoscope
of information in Linda Huang’s 166 page initiation report. >> Read Report
Linda says the sector is attractive in so many ways: grocery retail penetration is
low; urbanisation and increased car ownership is driving growth which is forecast
at 15% to 20% for at least a few years. She believes the winners will be those
companies with operational efficiency and economies of scale. As a result, she
believes this $20 billion sector is ripe for consolidation, especially when you
consider the low store density and attractive long term growth potential.
Among the larger names in the space, Linda’s top picks are Wumart Stores
(8277 HK) and China Resources Enterprise (291 HK). In here view, Wumart
is one of the best operated grocery retailers with EBIT margins well above peers,
plus the ability to pass on higher costs to consumers. As for CRE, she believes
the company could act as a consolidator, given its acquisitive history.

Highlights
 Colin Hamilton says iron ore degradation is a growing issue for the industry,
especially now with the supply chain stretched to its limit.
 Lee Bowers says site visits and a management briefing have affirmed the
quality and optionality of Rio Tinto’s world class Pilbara assets.
 With the recent sell-off in Thai banks, Passakorn Linmaneechote believes
it’s a good time to buy Kasikornbank (KBANK TB).
 If you are looking for a high quality defensive stock Paul Juniper thinks it’s
hard to go past CFS Retail Property Trust (CFX AU).