In today’s briefing:
- Sheng Siong Group Ltd: Inflection Point for a Great Performer
- It Is Not a Question of Whether Investment in Growth or Shareholder Return Is Better
Sheng Siong Group Ltd: Inflection Point for a Great Performer
We analysed Sheng Siong’s success over the years to see what its secret sauce is and what made the retailer so successful.
It has punched its weight above its competitors with a set of strong financial metrics. Its ability to generate free cash flow and achieve a high return on equity are truly impressive.
However, Sheng Siong is at an inflection point now as its revenue and net profit have stagnated since the pandemic.
It Is Not a Question of Whether Investment in Growth or Shareholder Return Is Better
- While the absolute amount of share repurchases has increased, many companies face challenges in using cash, given the slow growth in ROE and depth of equity capital over a decade.
- While growth investment should increase corporate value, it’s important for managers to manage to earn returns commensurate with investment risk, and to return cash to shareholders without taking unnecessary risks.
- The question is not whether investment in growth or shareholder return is better, but whether the company was managing its business in a shareholder-friendly manner.
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