Sheng Siong Group - Maybank Kim Eng 2015-10-23: Another One on the List

Sheng Siong Group - Maybank Kim Eng 2015-10-23: Another One on the List SHENG SIONG GROUP LTD OV8.SI 

Sheng Siong Group - Another One on the List 

  • 3Q15 results in line. Sales driven by five new stores added in Dec 2014 and 2015. 
  • New store in Queenstown to be opened in Nov 2015. 
  • Defensive business, highest margins among peers. Reiterate BUY with TP of SGD1.07, at 26x FY16E P/E. Expect catalysts from store openings. 



3Q15 Results in Line 

  • Sheng Siong’s 9M15 revenue and net profit were up 5.4% and 17.8% YoY respectively, forming 76% and 74% of our forecasts. About 6.2% of the revenue increase was contributed by the five new stores opened in Dec 2014 and 2015. We expect about SGD16m contribution from these new stores. 
  • On the other hand, SSSG was weak at 1.1% YoY, because 
    1. sales at older stores were lower; 
    2. sales at the Woodlands store contracted because of a weakening ringgit; 
    3. lower footfalls at the Loyang Point store due to ongoing renovation works in the vicinity; and 
    4. drastic fall in the sale of liquor after the imposition of a new regulation. 
  • Gross margin was stable at 24.3% in 3Q15, despite increased price competition from NTUC FairPrice arising from SG50 celebrations. 

Expanding its Network; Maintain BUY 

  • Sheng Siong will open a new store (about 4,300 sf) in Queenstown in Nov 2015. This brings the total number of stores to 39 and total retail area to 430,300 sf. Its store at Block 506 Tampines could be expanded to 20,000 sf (vs 15,000 sf previously) by the end of next year. 
  • Sheng Siong continues to look to expand its retail space in Singapore, while Giant is consolidating. 
  • In China, it is still looking at potential sites in Kunming to operate its first supermarket. 
  • We keep our FY15-17 EPS forecasts unchanged. The stock is currently trading at 20.6x FY16E P/E. 
  • We maintain BUY with TP of SGD1.07, at 26x FY16E P/E, 10% premium to peers’ average.


Yeak Chee Keong CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-23
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 1.07 Down 1.07


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