Sheng Siong Group - RHB Invest 2018-08-20: Highest Store Win In History

SHENG SIONG GROUP LTD SGX:OV8

Sheng Siong Group - Highest Store Win In History

Sheng Siong is our Top Pick in the Singapore consumer sector.
Reiterate BUY with higher Target Price of SGD1.30 from SGD1.27, implying 19% upside.
Sheng Siong announced last Friday that it signed another two new leases in Woodlands, which are expected to be operational this year, bringing total store wins to eight this year – this is in line with our forecast.
The two new stores have much larger retail spaces of 10,030sqf and 20,370sqf, which we believe will contribute strongly to 2019F-2020F growth.

Sheng Siong announced two new stores last Friday, which brings the group’s total store count to 52 this year, up from 44, in line with our full-year forecast.
The first new store, located at Block 785E Woodlands Rise, was won through the Housing and Development Board’s (HDB) private tender, with a size of 10,030sqf, and is expected to be operational in Sep 2018.

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The second new store is located in Junction 10 (also in Woodlands) and has a size of 20,370sqf. The lease was entered into with Dollar Land and is conditional upon Dollar Land delivering vacant possession of the premise on 26 Sep 2018. This store has a much larger retail size as it was previously leased to Giant Hypermarket.

In addition to the two new stores in Woodlands, the group is the highest bidder for two new shops at Block 451 Bukit Batok (6,880sqf) and Block 573 Woodlands (10,730sqf). Barring any unforeseen circumstances, HDB is likely to accept these bids over the next couple of months, and we expect these stores to commence operations either late this year or early next year.

Given the larger-than-expected retail space, we raise our 2019F-2020F earnings by 2-3%, which brings our Target Price to SGD1.30 based on a blended DCF and P/E valuation.
Given that a typical supermarket takes approximately three years to ramp up to a mature level of revenue, we expect the group’s earnings to grow at a CAGR of 11% over 2017-2020F.

Based on the HDB website, there are still six new supermarkets sites scheduled for tender from now until the end of the year. Any further new store wins for Sheng Siong would provide further upside potential to our current estimates.

Juliana Cai CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2018-08-20

SGX Stock Analyst Report BUY Maintain BUY 1.30 Up 1.270