SHENG SIONG GROUP LTD (SGX:OV8)
Sheng Siong Group - A Strong Quarter; Declares Higher DPS
- Strong 2Q due to elevated demand.
- Record high gross margin of 28.1%.
- Higher interim DPS of 3.5 cents.
2Q20 results beat estimates
- Sheng Siong Group (SGX:OV8)’s 2Q20 result was above our estimates due to stronger-than-expected sales. 2Q20 revenue rose 75.8% y-o-y to S$418.7m, while PATMI surged 150.4% y-o-y to S$46.1m, mainly attributable to elevated demand during the Circuit Breaker period as consumers loaded up on goods and products.
- Similar to the trend seen in 1Q20, same store sales were the key revenue driver this quarter. Of the 75.8% increase in revenue, 61.2 ppt was contributed by comparable same store sales and 13.3 ppt by new stores, with the remaining 1.3 ppt from the stores in China.
- Gross profit margin increased to 28.1% (0.7 ppt up y-o-y), largely due to lesser promotions backed by strong demand, improved sales mix with a higher proportion of fresh items and stable input prices.
- An interim dividend of 3.5 S cents per share was declared, as compared to 1.75 S cents per share in 2Q19.
Sheng Siong to open 3 more stores, bringing total to 64 in Singapore
- We understand from management that the Housing & Development Board (HDB) has not released any new spaces for bidding since Circuit Breaker as the bidding process was impacted by COVID-19. As at 30 Jun 2020, Sheng Siong has 61 stores in Singapore and 2 stores in China.
- Sheng Siong opened 2 new stores in 1H 2020 and is expected to open 3 new stores in 2H 2020 in Singapore. With these additional stores, Sheng Siong’s total store count will increase to 66 (64 in Singapore and 2 in China).
Demand could moderate in 2H from 2Q’s level
- Looking ahead, we believe new stores growth will remain Sheng Siong’s key growth driver and strategy. We expect demand to taper off in 2H, from the strong sales level seen during 2Q20, but demand should still remain healthy. Social distancing, fears of contagions and the recent change to eat more frequently at home could continue to support supermarket sales growth.
- We adjusted our FY20/FY21 earnings by +32%/13%, and our fair value increases from S$1.64 to S$1.85.
- See Sheng Siong Share Price; Sheng Siong Target Price; Sheng Siong Analyst Reports; Sheng Siong Dividend History; Sheng Siong Announcements; Sheng Siong Latest News.
- Sheng Siong's share price has done well, up 36% YTD (based on the closing price on 30 Jul 2020) and is trading close to the all-time high currently.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2020-08-03
SGX Stock
Analyst Report
1.85
UP
1.640
