SHENG SIONG GROUP LTD (SGX:OV8)
Sheng Siong Group - Strong Sales Boosted By Higher Demand
- Strong sales boosted by COVID-19.
- Same store sales were key driver in 1Q.
- Increasing Fair Value from S$1.45 to S$1.64.
Elevated demand as people load up…
- Sheng Siong (SGX:OV8)’s 1Q20 result was above our estimates due to stronger-than-expected sales. 1Q20 revenue grew 30.7% y-o-y to S$328.7m, while PATMI rose 48.2% y-o-y to S$28.7m, mainly attributed to higher Chinese New Year sales and elevated demand after the Singapore government changed the DORSCON level to Orange in February – in view of the rising concern over the spread of COVID-19.
- Unlike other quarters, same store sales were the key revenue driver this quarter. Of the 30.7% increase in revenue, 19.7 ppt was contributed by comparable same store sales and 9.0 ppt by new stores, with the remaining 2.0 ppt from the stores in China.
- Gross profit margin increased to 27.0% (0.9 ppt up y-o-y), largely due to better sales of household brands which carry higher margins and slightly lower input prices of non-fresh products on the back of diversified sourcing to cope with elevated demand.
Sheng Siong to open 3 stores in FY20, bringing total to 64 in Singapore
- As at 31 Mar 2020, Sheng Siong has 61 stores in Singapore.
- We understand from management that Sheng Siong has secured two new HDB stores and also won a tender for a shop in Potong Pasir Community Club. Renovation and opening of these three stores are slightly delayed due to the current Circuit Breaker (CB) period in Singapore. The stores are likely to open in 3Q20. With these additional stores, SSG’s total store count will increase to 64 with retail area of 575,160 square feet in Singapore.
Expecting stronger 2Q20, but demand could come off after CB is lifted
- Management noted that there was no major disruption in supply chain in 1Q, thanks to its diversified sourcing and its move to stock up inventories since the end of 4Q19. Management has been working closely with impacted countries and sourcing for alternative suppliers when necessary.
- On 7 Apr 2020, Singapore entered the CB period to combat the spread of COVID-19. Sheng Siong is likely to see the full impact of elevated demand in its 2Q results. However, demand could potentially taper off in 2H after the lifting of CB.
- We adjusted our FY20/FY21 earnings by +17%/11%, our fair value increases from S$1.45 to S$1.64.
- See Sheng Siong Share Price; Sheng Siong Target Price; Sheng Siong Analyst Reports; Sheng Siong Dividend History; Sheng Siong Announcements; Sheng Siong Latest News.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2020-04-30
SGX Stock
Analyst Report
1.64
UP
1.450
