Sheng Siong Group - Phillip Securities 2019-05-02: Still Grabbing Market Share


Sheng Siong Group - Still Grabbing Market Share

  • SHENG SIONG GROUP LTD (SGX:OV8)'s 1Q19 revenue was above our expectations. PATMI was below estimates as operating expenses were moderately higher than expected.
  • Gross margin was relatively flat compared to a year ago.
  • Secured three new stores this year, a 3% boost in total store footprint.
  • We have kept our forecast unchanged. Upgrade to BUY from ACCUMULATE with unchanged target price of S$1.30. Continued store expansion and market share gains are the twin drivers of growth.

The Positive

Sales growth was healthy.

  • SHENG SIONG GROUP LTD (SGX:OV8)'s 1Q19 sales growth of 10.1% y-o-y was above our modelled 7%. Growth was supported purely by the new stores as same-store sales contracted 1% y-o-y.

Three new stores secured.

  • In May 2019, Sheng Siong secured 3 new stores (or 15,780 sft). This will boost total store footprint by 3%. These three stores are close-bid stores retendered from existing sites that were given up. Another six new stores have recently been tendered out by HDB. These stores may include non-price factors as part of the requirements.

The Negative

Same-store sales a worry.

  • As per the previous quarter, same-store sales is the weak spot. It contracted 1% during the quarter. This is comparable to the almost 2% same-store sales decline recorded by supermarkets located within retail malls*. (*Using data from CapitaLand Mall Trust 1Q19 presentation as a proxy.)

Operating expenses trended higher.

  • Sheng Siong's 1Q19 operating expenses was 17.7% of sales, marginally higher than our modelled 17.5%. New stores will require time to scale up. According to the company, gross margins were a tad lower due to the timing of rebates. Contribution of fresh products to the sales mix was in fact higher y-o-y in 1Q19.


  • In spite of the weak consumer sentiment, Sheng Siong has been raising their market share of supermarket sales. Supermarket sales in Singapore contracted almost 2% year-to-date, as at end-Feb 2019. Sheng Siong would have captured market share with their 10% jump in sales.
  • We are still positive on the outlook. The almost 11% growth in retail space for 2019 will help support growth. Another growth driver will be the higher sales per square feet.

Upgrade to BUY with unchanged Target Price of S$1.30.

  • Our Target Price is based on an estimated 25x PE multiple.
  • Sheng Siong is expanding its store count, increasing market share and currently offers a 25% ROE with a S$87mn net cash balance sheet.

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2019-05-02
SGX Stock Analyst Report BUY UPGRADE ACCUMULATE 1.300 SAME 1.300