Sheng Siong - 4Q16 Results Flash Note
- Sheng Siong’s FY16 earnings was in line with our expectation.
- We make no change to our earnings estimates and maintain our BUY rating and TP SGD1.21.
- Sheng Siong should be able to open new stores in 2017 despite the keen competition in HDB commercial rental market.
- Five designated supermarket sites will be opened up for bidding over next 6 months just from HDB. We believe small players could struggle to keep on bidding aggressively at a rental rate of over SGD20 per sq. ft. Moreover, aside from the HDB commercial space, there could be more retail space let out given the slowdown in economy.
- At the moment, we understand that Sheng Siong is participating in a couple of tenders in addition to HDB commercial space bidding.
- Slight positive from delays in closure of Woodlands and the Verge supermarkets. The Verge and Woodlands Checkpoint supermarkets which were to close on 30 April and 30 June 2017, respectively, will now remain open till 31 May and 31 August 2017, respectively.
- We continue to like Sheng Siong as current price level implies a dividend yield of > 4%.
- The nine new stores that were opened during FY15-FY16 should continue to witness growth in sales.