SHENG SIONG GROUP LTD (SGX:OV8)
Sheng Siong Group - Resilience Despite No New Shops
- Sheng Siong (SGX:OV8)'s 1Q21 revenue and earnings were within expectations, at 27%/30% of forecasts. 1Q21 benefitted from festive spending. Gross margins remained elevated at 27.6% vs pre-pandemic’s 26.8%.
- No new stores were opened in past six months. Tenders of new HDB stores have been delayed, except for one large upcoming bid.
- With international borders still closed, revenue should remain above pre-pandemic levels. FY22e to benefit from accelerated rollout of new stores. Sheng Siong's 1Q21 annualised revenue per sq ft was S$2,363, towering above S$1,916 in pre-pandemic 2019.
Sheng Siong provided 1Q21 business updates
- See report attached below for summary of results.
The Positives
Revenue resilience.
- Revenue growth was entirely powered by new stores opened for a year. 1Q21 annualised revenue per sq ft remained a lofty S$2,363 vs pre-pandemic’s S$1,916 in 2019. Gross margins at 27.6% were above historical levels of 26.8%, thanks to lower input prices and a higher sales mix of fresh goods.
Healthy cash and strengthening balance sheet.
- Operating cash flow generated in 1Q21 was S$28.8mn. Net cash is now S$241mn (4Q20: S$224mn).
The Negative
No store openings.
- There were no new store openings in the past six months. Sheng Siong was not successful in two tenders in November. HDB has temporarily paused on tenders except for a large store Sheng Siong is looking to bid in the current quarter which could potentially be rolled out in 3Q21.
Outlook
- Sheng Siong's 1Q21 revenue per sq ft remained elevated at S$2,363 on an annualised basis (FY20: S$2,423). A reason was the continued closure of international borders, which kept more households in the country. Working from home was another contributor. As borders re-open, growth in FY22e should stem from accelerated store expansion from the recent pause in HDB tenders.
Maintain ACCUMULATE with unchanged TP of S$1.71
- Sheng Siong’s investment merits remain its impressive 26% ROEs, dividend yields of 3.2% and net cash of S$224mn.
- Our FY21e PATMI forecasts and target price of S$1.71 for Sheng Siong are unchanged, at 25x P/E, its 5-year historical average. Maintain ACCUMULATE.
- Stock catalysts are expected from new store openings.
- See Sheng Siong Share Price; Sheng Siong Target Price; Sheng Siong Analyst Reports; Sheng Siong Dividend History; Sheng Siong Announcements; Sheng Siong Latest News.
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-04-28
SGX Stock
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