SHENG SIONG GROUP LTD (SGX:OV8)
Sheng Siong Group - Good Ending To 2021
- Sheng Siong reported record gross profit margin of 29.4% in 4Q21.
- Total dividend of 6.2 cents per share declared.
- Expecting to open 2 new stores in 1H22.
In-line set of results
- Sheng Siong (SGX:OV8)’s 4Q21 revenue rose 6.5% y-o-y to S$340.0m while PATMI increased 1.9% y-o-y to S$32.5m, supported by workers continuing to work from home and tightened safe management measures due to the Omicron variant.
- On a full-year basis, Sheng Siong's revenue fell 1.7% y-o-y to S$1.4b while PATMI was down 4.3% y-o-y to S$133.1m, mainly due to the high base effect in FY20 on the back of elevated demand.
- Comparable same store sales decreased 4.8% y-o-y in FY21, but were partially offset by a 2.9% growth from the full year contributions of five new stores which opened in FY20.
- Gross profit margin increased by 1.3 ppt y-o-y to 28.7% for FY21, largely due to improved sales mix pf higher margin products.
- A final dividend of 3.1 cents per share was declared, taking Sheng Siong's total dividend for FY21 to 6.2 cents per share (-4.6% y-o-y).
Sheng Siong opened 1 new store in Singapore for FY21
- Sheng Siong opened one new store in Singapore and two stores in China in FY21 as tender process and construction of HDB flats were delayed by the COVID-19 pandemic. As at 31 Dec 2021, Sheng Siong has 64 stores in Singapore and four stores in China. Management plans to open two new stores in 1H22.
- To mitigate cost pressures amid rising inflation, management will ensure a diversified base of supplies which continues to be Sheng Siong’s strategy, and to introduce cheaper and more affordable products to customers. However, the challenge comes from customer’s acceptance of new products due to brand loyalty.
- In addition, Sheng Siong may consider more bulk buying at cheaper prices but will avoid increasing inventory unnecessarily. Importantly, Sheng Siong would like to retain price competitiveness compared to its competitors.
Modest adjustment to fair value estimate
- Singapore has been taking the lead in Asia’s borders reopening with the expansion of Vaccinated Travel Lanes and its commitment to “living with the endemic strategy”. As borders reopen and domestic safe management measures ease in Singapore, we believe demand for groceries will taper off and estimate a 5% y-o-y decline in Sheng Siong’s sales for FY22, partially offset by contribution from new stores opened in FY21 and FY22.
- After adjustments, we lower our fair value estimate for Sheng Siong marginally from S$1.63 to S$1.62.
- See
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2022-02-28
SGX Stock
Analyst Report
1.62
DOWN
1.630
