Sheng Siong Group - UOB Kay Hian 2018-08-21: New Store Wins On Track To Meet Our Expectation

Sheng Siong Group (SSG SP) - UOB Kay Hian Research 2018-08-21: New Store Wins On Track To Meet Our Expectation SHENG SIONG GROUP LTD SGX:OV8

Sheng Siong Group (SSG SP) - New Store Wins On Track To Meet Our Expectation

  • Sheng Siong secured two new store wins in Woodlands and is the highest bidder for two more store tenders. Its total store count is expected to increase to 52 in 4Q18, from 48 in 2Q18.
  • The store wins are more than enough to compensate for the closure of two large stores in 2017, and Sheng Siong is on track to meet our expectation of 9 new stores and EPS growth of 7.6% for 2018.
  • We raise our target price by 4.6% to S$1.14. Maintain HOLD. Entry price: S$1.05.


Secured two new stores and two more in the bag.

  • On 17 Aug 18, Sheng Siong Group (Sheng Siong) announced that it had won a tender from HDB to lease a new store of 10,030sf at Woodlands and this store is expected to start operations in Sep 18. It has also secured a new 20,370sf retail space from Dollar Land Singapore in Woodlands and operations should start before end-18.
  • In addition, Sheng Siong was also the highest bidder for two more new HDB shops in Bukit Batok and Woodlands.

New stores more than enough to compensate for two major closures in 2017.

  • The new stores won so far are more than enough for Sheng Siong to compensate for the closure of two major stores which cumulatively spanned more than 40,000 sf, one in Woodlands and one in Serangoon. 
  • Assuming Sheng Siong does not win more new stores in 2018, the 9 new store additions ytd would bring its total store size to 477,620 sf, from 404,000 sf in 2017. This is higher than 2016’s level of 450,000 sf, before the closure of 2 large stores.

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New stores should drive growth to meet our earnings expectation.

  • The new stores should help Sheng Siong drive growth and meet our 2018 earnings growth estimate of 7.6%. In addition, the stores opened in late-18 should also help drive growth for 2019.


  • We maintain our earnings forecasts.
  • Risks include:
    1. intensifying competition from other large players including NTUC and Giant,
    2. price war from online grocery store players, especially Redmart, and
    3. return of irrational bidding for supermarket units which will result in fewer new store wins.


Maintain HOLD with a higher target price of S$1.14 (+5.5%).

  • We switched our valuation methodology to DCF to better capture the long-term potential of Sheng Siong. Our target price of S$1.14 implies 2018F and 2019F P/E of 23.7x and 21.8x.


  • Higher-than-expected SSS growth.
  • Higher-than-expected new store wins.
  • Faster-than-expected ramp-up and expansion in China.

Singapore Research UOB Kay Hian Research | https://research.uobkayhian.com/ 2018-08-21
SGX Stock Analyst Report HOLD Maintain HOLD 1.14 Up 1.090