Sheng Siong - RHB Invest 2020-10-30: Possibilities With Huge Cash Pile; BUY

SHENG SIONG GROUP LTD (SGX:OV8) | SGinvestors.io SHENG SIONG GROUP LTD (SGX:OV8)

Sheng Siong - Possibilities With Huge Cash Pile; BUY

  • Sheng Siong (SGX:OV8) announced its 3Q20 business update yesterday evening. 3Q20 revenue grew by a strong 29% y-o-y on higher home consumption demand, as a result of COVID-19. This, together with improved operating leverage and government grants, brought 3Q20 PATMI to SGD31.8m (+54% y-o-y).
  • Sheng Siong's 9M20 PATMI of SGD107m met 85% of our full-year estimate, exceeding our and Street expectations.





Sheng Siong opened 10 new stores in the past two years.

  • These new stores contributed 9.5ppt to Sheng Siong’s 3Q20 y-o-y revenue growth of 29%. Of these, five stores were opened this year.
  • As the elevated demand from home consumption moderates with the reopening of economic activities and easing of restrictions, we believe sales will continue to be supported by the maturing of these new stores, which should contribute positively to FY21F revenue growth.
  • Although no new shops were released for tender by the Housing Development Board (HDB) this quarter – since construction was delayed due to the pandemic – management expects a slew of new shops to be released for tender, once the backlog is cleared. According to HDB, there will be seven new sites for supermarkets released from now until the end of 2021. As such, the prospects for new store openings remain positive.


Gross margin remains stable.

  • Sheng Siong's 3Q20 gross margin reverted to the norm of 27%, from a high of 28.1% in 2Q20 as sales and promotions in the industry recovered back to pre-pandemic levels.
  • We expect Sheng Siong's FY21-22 GPM to remain fairly stable, with a slight uplift from 3Q20 levels arising from an improved sales mix.

Huge cash stash - Sheng Siong has amassed net cash of SGD180m as at 30 Sep






Juliana Cai RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-10-30
SGX Stock Analyst Report BUY MAINTAIN BUY 1.870 SAME 1.870



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