SHENG SIONG GROUP LTD (SGX:OV8)
Sheng Siong Group - New Store Sales Drove Growth In 1Q21
- Gross profit margin rose to 27.6%.
- Demand remained elevated due to WFH trend and travel restrictions.
- Lower fair value estimate of S$1.72.
Growth in revenue was contributed entirely by new stores
- Sheng Siong Group (SGX:OV8)’s 1Q21 result was above our estimates due to stronger-than-expected gross profit margins. 1Q21 revenue grew 2.7% y-o-y to S$337.5m, while PATMI rose 7.5% y-o-y to S$30.8m, contributed entirely by growth in new stores. Demand remained elevated due to WFH trend and travel restrictions.
- Despite high base in 1Q20, Sheng Siong's comparable same store sales managed to hold ground and was flat in 1Q21.
- Gross profit margin increased to 27.6% (+0.6 ppt y-o-y), largely due to lower input prices which management attributed it to better merchandising power and seasonality effect.
No new store opened in 1Q21
- As at 31 Mar 2021, Sheng Siong has 63 stores in Singapore and 2 stores in China. Sheng Siong did not open any new store in 1Q21.
- Sheng Siong submitted tenders for two shops in Nov 2020 but were unsuccessful. Management mentioned that there could be a tender for a new shop soon as constructions for HDB were delayed by COVID-19. As construction activities resume gradually, we could see more tenders towards the end of 2021 and 2022.
Demand is likely to remain supported in 1H21 but could moderate in 2H21
- Looking ahead, we believe new stores growth will remain Sheng Siong’s key growth driver and strategy as demand normalises from the 2020 levels. As it takes time to vaccinate the entire population in Singapore and international borders remain largely closed, we expect social distancing, WFH trend and the tendency to eat more frequently at home likely to remain in 2021. This should help to support supermarket sales growth in 1H21 but demand could moderate in 2H21.
- After adjustments, our fair value estimate for Sheng Siong decreases from S$1.79 to S$1.72.
- 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/
2021-04-28
SGX Stock
Analyst Report
1.72
DOWN
1.790
