DBS Group Research has initiated coverage of Singapore supermarket operator Sheng Siong Group with a hold rating and a share price target of $0.49.

Sheng Siong shares were up 1 percent at $0.49 in morning trade.

DBS said Sheng Siong is a niche player in a defensive sector, with a 90% dividend payout ratio, free cashflow of 3 to 4 cents per share going forward and higher dividend yields than its peers.

Its compound annual growth rate for core earnings in the 2011-2013 fiscal years is projected at 20%, driven by store expansions and operating efficiencies from a new warehouse, DBS said.   

It said the current share price looks fairly valued.