Sheng Siong Group (SSG SP) - DBS Research 2017-10-27: Going Strong

Sheng Siong Group (SSG SP) - DBS Vickers 2017-10-27: Going Strong SHENG SIONG GROUP LTD OV8.SI

Sheng Siong Group (SSG SP) - Going Strong

  • 3Q17 within expectations.
  • Sales per square feet and EBIT margins at an all-time high of S$1,975 and 9%.
  • Headline earnings boosted by tax adjustment as well.
  • Maintain BUY with S$1.19 TP.

What’s New 

3Q17 in line. 

  • Sheng Siong posted 3Q17 results that were within expectations. 
  • Revenue grew 4.2% y-o-y to S$211m. This was largely driven by new stores (+3.9%) and same store sales growth (SSSG) of 1.7%, offset by closure of Loyang Point for renovation, and its outlet at the Verge. Sales per square feet was at an all-time high of S$1,975.
  • Gross margins remained healthy at 25.8%, sequentially lower due to seasonal promotions and discounting for the seventh month festive season. EBIT margin at 9% was also at an historical high due to strong gross margins and modest increase in opex relative to revenue growth. 
  • There was a one-off tax refund of S$2.2m for prior year’s tax which boosted headline earnings as well. Tax rate was c.17% otherwise.

Operations remain strong, maintain BUY with S$1.19 TP.

  • Despite the opening of Amazon Prime, there was no letup operationally. In fact, margins and sales parameters grew stronger y-o-y. This was partly due to closure of the Verge store, which was performing weaker than the rest of the stores. 
  • Three more stores (Woodlands Street 12 (11,800 sqft), Punggol Edgedale Plains (3,100 sqft) and Sengkang Anchorvale (5,100 sqft)) are due to open in 4Q17. Its new Kunming store is due to open by end of 2017. 
  • Our earnings forecast is largely unchanged. Maintain BUY with S$1.19 TP based on 25x FY18F PE.

Alfie YEO DBS Vickers | Andy SIM CFA DBS Vickers | 2017-10-27
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.19 Down 1.200