Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

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<li>
<a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> reported another resilient quarter with revenue growth at 4.7% YoY and profit growth flat, with annualized ROCEs at 27%. </li>
<li>Net cash grew to 289 mn SGD (highest ever now at 12% of market capitalization). The company is expected to expand by 3-4 stores in FY23 for Singapore.</li>
<li>While the stock is not cheap at 19x/18x FY23e/FY24e and 3.8% dividend yield, we see prospects for margin expansion in further quarters as execution remains high quality.</li>
</ul>



Sheng Siong (SSG SP) reported another resilient quarter with revenue growth at 4.7% YoY and profit growth flat, with annualized ROCEs at 27%. 
Net cash grew to 289 mn SGD (highest ever now at 12% of market capitalization). The company is expected to expand by 3-4 stores in FY23 for Singapore.
While the stock is not cheap at 19x/18x FY23e/FY24e and 3.8% dividend yield, we see prospects for margin expansion in further quarters as execution remains high quality.


Sheng Siong (SSG SP): Another Resilient Quarter, Cash Pile Growth Continues

<ul>
<li>It attracts investors when a company's 15-year ROCE averages over 25% (and has never gone below 20%). <a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> is one of those companies.</li>
<li>With 13% of the market capitalization in net cash (283 mn SGD) and a payout ratio averaging 70%, the stock trades at a yield of almost 4%.</li>
<li>We believe the store expansion of 3-4 stores/year ( on a base of 67) in Singapore is possible, given the pipeline of HDB tenders.</li>
</ul>


It attracts investors when a company's 15-year ROCE averages over 25% (and has never gone below 20%). Sheng Siong (SSG SP) is one of those companies.
With 13% of the market capitalization in net cash (283 mn SGD) and a payout ratio averaging 70%, the stock trades at a yield of almost 4%.
We believe the store expansion of 3-4 stores/year ( on a base of 67) in Singapore is possible, given the pipeline of HDB tenders.


Sheng Siong (SSG SP): Steady At Execution, Good Long-Term Play

Equity Analyst - Asia Consumer Sector, Investory

Devi Subhakesan

Equity Analyst - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

<ul>
<li>The ramp-up in public housing supply in Singapore could be an opportunity for <a href="https://www.smartkarma.com/entities/kimly-ltd" target="_blank" data-smartkarma-citation="entities:28157:1" rel="noopener">Kimly Ltd</a> to fast-track expansion given its outlets, food-stalls are mostly located in public housing blocks. </li>
<li>Bigger F&amp;B retail players like Kimly are better positioned versus others to weather the multiple headwinds faced by Singapore F&amp;B retail sector today. </li>
<li>Upcoming 1H FY2023 results can trigger an up move in the stock <strong>if</strong> the company reports a meaningful margin recovery. Current undemanding valuations reflect heightened investor concerns.  </li>
</ul>


The ramp-up in public housing supply in Singapore could be an opportunity for Kimly Ltd to fast-track expansion given its outlets, food-stalls are mostly located in public housing blocks. 
Bigger F&amp;B retail players like Kimly are better positioned versus others to weather the multiple headwinds faced by Singapore F&amp;B retail sector today. 
Upcoming 1H FY2023 results can trigger an up move in the stock if the company reports a meaningful margin recovery. Current undemanding valuations reflect heightened investor concerns.  


Kimly (KMLY SP): Ramp up in Public Housing Supply, an Opportunity to Expand

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> management hinted at possible accelerated store growth referring to news reports about Singapore ramping up public housing to meet strong demand. </li>
<li>Singapore minister's comment on public housing BTO projects under construction to increase to 150 in 2025 (from 100 currently) suggests a strong project pipeline in the next few years too.</li>
<li>Muted 1Q2023 performance reported- decline in revenues and profits, yoy - in line with expectations as shopping 'normalize' post-COVID.</li>
</ul>



Sheng Siong (SSG SP) management hinted at possible accelerated store growth referring to news reports about Singapore ramping up public housing to meet strong demand. 
Singapore minister's comment on public housing BTO projects under construction to increase to 150 in 2025 (from 100 currently) suggests a strong project pipeline in the next few years too.
Muted 1Q2023 performance reported- decline in revenues and profits, yoy - in line with expectations as shopping 'normalize' post-COVID.


Sheng Siong (SSG SP): Upbeat on Potential Ramp up in Store Growth

<ul>
<li>Sheng Siong reported a notable decline in same-store sales and operating profits (ex-one off income) for 6M/FY Dec2022 even as it marginally increased annual dividend payout to 70.5%.</li>
<li>With Singapore's 10-year Gov. bond yields at 3.34% (vs. sub1%, 3 years ago), dividend yield players like Sheng Siong (SSG SP) may not offer attractive risk-reward at current levels.</li>
<li>Sheng Siong has traded at dividend yields ranging 3%-3.9% over past 3 years, mostly at a premium to Gov. bond yields. Given muted dividend growth potential, stock faces downside risk.</li>
</ul>


Sheng Siong reported a notable decline in same-store sales and operating profits (ex-one off income) for 6M/FY Dec2022 even as it marginally increased annual dividend payout to 70.5%.
With Singapore's 10-year Gov. bond yields at 3.34% (vs. sub1%, 3 years ago), dividend yield players like Sheng Siong (SSG SP) may not offer attractive risk-reward at current levels.
Sheng Siong has traded at dividend yields ranging 3%-3.9% over past 3 years, mostly at a premium to Gov. bond yields. Given muted dividend growth potential, stock faces downside risk.


Sheng Siong (SSG SP): Slowing Sales. Dividend Yield Not Rewarding Enough

Singapore

Sheng Siong Group Ltd. operates a chain of supermarket retail stores, offering a wide assortment of live, fresh, and chilled produce, pantry staples, packaged foods, and household merchandise. The company also engages in general trading, wholesale import and export, and operates an online grocery platform. Sheng Siong was founded in 1985 and is headquartered in Singapore.

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Sheng Siong (SSG SP)