Following the performance of Sheng Siong during the pandemic, analysts have mixed opinions about its future implementation in place of shifts in consumption following the COVID-19 pandemic. Some believe that the change in consumption patterns will support Sheng Siong’s profits.
However, as vaccination rates increases and inflation continues, other analysts believe that the supermarket chain profits might dip as travel resumes. The rise in inflation will impact Sheng Siong’s input costs which are expected to affect the margins for FY2022.
The company continues to grow its brand, and its management is working to nurture its operations in Kunming, China. Sheng Siong now has four stores in China, and they are looking to continue expanding across the country.
About Sheng Siong
Founded in 1985 by the Lim brothers, Sheng Siong is a supermarket chain with deep roots in Singapore. It is a Singapore-based investment holding company with its subsidiaries engaging in trading and wholesale imports of consumer goods.
The supermarket chain is designed to provide its customers with wet and dry shopping goods that range from fresh and chilled produce. These include seafood, fruits, meat, processed food, preserved food products, and general merchandise such as toiletries and essential household products. They also provide a wide assortment of vegetables.
Sheng Sion offers over 1,400 products under 23 brands and has an online shopping brand, allforyour.sg. The e-commerce service is available in all postal districts in the country.
Sheng Siong Group Limited has wholly-owned subsidiaries, including CMM Marketing Pte Ltd and Sheng Siong Supermarket Pte Ltd.
Sheng Siong’s Share Price & Target Price
Current share price: SGD 1.520 (-0.010 / -0.65%)
Share Price as of 2022-03-29 5:16pm
Table of The Price History
Source: https://sginvestors.io/sgx/stock/ov8-sheng-siong/analyst-report
What Do Analysts Say?
According to analyst estimates, Sheng Siong’s 3Q21 profit of S$34 exceeded expectations. The company’s revenue mainly grew due to the tighter COVID-19 restrictions, while its gross margins jumped 2 points to a record level of 29% due to increased sales.
Sheng Siong also expanded to China with its third store in August 2021 and the fourth one towards the end. The group continues to grow its operations in China, leading to growth in the profit margins. The 3rd retail store in Kunming, China, is about 37,800 square feet, while the fourth is approximately 30,772 sf.
While its operations are only about 2% of the group’s total revenues, the supermarket chain continues to be profitable.
Sheng Siong’s demand is expected to taper off in the coming quarters of 2022 while Singapore moves towards treating COVID-19 as an endemic. Singapore plans to gradually ease the COVID-19 restrictions as more citizens are getting vaccinated.
However, total relaxation from the restrictions could take time, and the WHF trend and social distancing might continue. People are likely to eat more at home, supporting supermarket sales.
Is Sheng Siong a Good Stock to Buy?
Sheng Siong’s earnings per share (EPS) has grown by 24% per year in the past three years. If the companies continue to sustain that type of growth, then the shareholders will be winners here. While the company’s earnings before interest and tax margins (EBIT) were flat over the last years, the revenue grew by 2% to S$1.3b, which is good.
So, is the Sheng Siong an excellent stock to buy? Yes. The company has shown gradual profit growth and expansion over the past year. Members are expected to earn high dividends if the company continues on such a winning streak.
The company’s expansion to other markets is critical in improving its gross margins. Sheng Siong is also a great investment option if you want to add a steady passive income stream to your investment portfolio. It has consistently paid out dividends each year, even with the pandemic.
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Related Questions
Why Did Sheng Siong Share Price Drop?
There is a forecast that with the lowering in demand and slower increase in new store opening, its earnings per share for the 2022 financial year is expected to decline by 7 % y-o-y.
Is Sheng Siong Group Ltd Public Listed?
Founded by Mr. Lim Hock Chee and his brother, Mr. Lim Hock Leng and Mr. Lim Hock Eng, the company has been publicly listed on the Singapore Exchange with code:0V8 since 17th August 2011. Sheng Siong has also been awarded super brands from 2008 to 2014.
How Can You Invest In Sheng Siong Group Ltd?
All you need is a brokerage account to invest in Sheng Siong. If you have plans to hold the shares for a long time, you will need to open a Central Depository (CDP)account where you will store your shares.
What is the Market Cap of Sheng Siong?
Market cap is calculated by multiplying the number of shares by the outstanding stock price. As of the last closing price of S$1.52, Sheng Siong has a market cap of S$2.29b.
The market capitalisation allows investors to estimate the size of a company against another.
What Give Sheng Siong Its Competitive Advantage?
The supermarket chain offers its groceries at very fair prices. This means a price change would lead to a considerable shift in the demand for its commodities. Its competitive advantage is in its cost and pricing; therefore, lowering its prices would lower its profit margins.
Sheng Siong model is designed to provide customers with exceptional service, which has allowed it to expand successfully to other markets. It has opened two profitable stores in Kunming, China, its regional expansion strategy. Its debt to equity ratio has also reduced over the past five years.
Are Sheng Siong Group Insiders Aligned with Their Shareholders?
High insider ownership of a company suggests that the company will be managed in the interest of the shareholders. So the fact that Sheng Siong Group Ltd insiders own many shares is a good thing to an ordinary shareholder.
Insiders own 38% of the shares, making them a very influential shareholder group. This also means that the running of the business is genuinely motivated to create shareholder value. Currently, the insider holding is worth S$844m, which means that a lot of their capital is riding on the performance of the business.
How Often is Sheng Siong Group Ltd Dividend Pay Date?
Sheng Siong Group Ltd pays out its dividend twice a year. In 2021, the company gave S$0.03 per share.
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Closing
Sheng Siong Limited operates supermarket retail stores in Singapore. The company has recorded exceptional profit margins over the past three years. However, with the ease of the COVID-19 restrictions, its earnings are expected to decline by 2.6% over the next three years.
Key Takeaways
- Sheng Siong has registered exceptional performance over the past three years that, however, is expected to change with the ease of the COVID-19 restrictions.
- Sheng Siong is gradually expanding to China, intending to increase its customer base and profit margins.
- Its ROE is expected to be high in 3 years by about 23.5%and its PE ratio is in line with the Asian Consumer Retailing Industry.
- Sheng Siong shares its profits with its employees to promote loyalty among its staff.
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