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1Q14 net profit grew 19.3% to $12.5m while topline increased 5% to $189.7m. Increased sales were from 8 new stores in 2012, as well as a 3% increase on a SSSG basis, result of longer operating hours and increased marketing initiatives. Bottom line was improved by gross margin which climbed 1.3ppt to 23.8%, due to adjustment to rebates received, as well as efficiency gains from the Mandai distribution center. Increase in admin costs arose from higher bonus provision for better performance in 1Q14 vs 1Q13. Sheng Siong did not find a suitable retail space to open stores in 1Q14, this being the same from FY13. It now has 33 stores. The supermarket space competition is likely to continue, while cost pressures on food and manpower would remain the trend. Management will continue its margin enhancement activities. Sheng Siong trades at annualized 1Q14 P/E of 16.5x Daiwa remains O/PF with TP of $0.67
Fyi, Sheng Siong is proposing renewal of share buyback mandate ....
Daiwa notes that although Sheng Siong' s expansion plans may be hindered by a challenging rental market, it is actively taking measures to boost same-store-sales (SSS) growth and contain costs. After seeing a positive customer response to the 2 stores it renovated in 2013, the company intends to renovate another 3 of its older stores during 2014, with an aim to boost SSS. Daiwa continue to like Sheng Siong for its exposure to a defensive business within the Singapore consumer sector, supported by a strong balance sheet and reasonable looking 2014E dividend yield of 4.5%. House has an Outperform rating with $0.67 TP.
probably will take some time to recover
Will a merger with NTUC fairprice make sense ?
Is the will power to expand the company impacted by the most recent incident ?
It may take some time in rethinking its roadmap
Slower growth ahead ....
- FY13 results in-line
- Expect stable margins and slower growth in FY14
- Prudent expansion and execution
FY13 results in-line
Sheng Siong Group?s (SSG) FY13 revenue increased 7.9% to S$687.4m and forms 99.9% of our forecasts. Gross margin improved from 22.1% to 23.0% due to better sales mix and utilisation of distribution centre. Core net profit increased 18.6% to S$38.9m, or about 99.2% of our forecasts. A final dividend of 1.4 S-cents per share is proposed, bringing the total dividend to 2.6 S-cents per share in FY13, or a yield of 4.3% based on Friday?s closing price.
Expect stable margins and slower growth in FY14
We expect revenue growth in 2014 to be slower at 5%, which is to be mainly driven by the maturing 11 new stores opened in FY11 and FY12. SSSG is expected to be relatively flat as benefits of 24h operations have been reaped in FY13. Management guided that the Bedok Central and the Verge stores continue to be affected by the construction activities, which we think have bottomed out and could provide upside surprise if normalcy resumes soon. We expect operating profit margins to be stable around 7%. We think gross margin will improve through higher warehouse utilisation, direct sourcing and better sales mix. But these are likely to be negated by higher labour costs from foreign worker levies and wage inflation as competition for local service staff intensifies amidst foreign labour tightening policies.
Prudent expansion and execution
Management revealed that they had a few options in FY13 to open new stores but did not as the price was not right. They also emphasised that they would want to see success in the pilot e-commerce project first before scaling up to the whole island. Instead of chasing short-term performance numbers to show the market, we think the demonstrated prudence in expansion and execution are essential decision-making processes for long-term growth and preservation of net profit margins. We maintain our BUY call with a new fair value of S$0.68 as we roll forward our DCF model. ...last:$0.610...
Source: OCBC Research
Sheng Siong Group?s core net profit grew 18.6% yoy
to S$38.9 million for FY2013
Revenue increased 7.9% yoy to S$687.4 million in FY2013 largely due to higher
new stores sales, which was offset partially by lower comparable same store
sales
Gross profit margin increased from 22.1% in FY2012 to 23.0% in FY2013 mainly
due to lower input costs derived from the distribution centre and better sales mix
Proposed final dividend of 1.4 cents per share, bringing the total dividend to 2.6
cents per share or equivalent to a payout ratio of around 92.5% for FY2013
Board reiterates commitment to continue distributing up to 90% of net profit after
tax for FY2014
Committed to nurturing the growth of the new stores and expanding store footprint across Singapore
Press release
Sheng Siong would do better by merger with NTUC fairprice?
Benefits
Better economy of scale
Leverage on critical volume of purchase at better price.
SG mkt too small and reach saturation point quickly.
One big family
We understand from a recent meet up with Sheng Siong Group?s (SSG) management that the highly anticipated e-commerce is in its pilot phase. Management prefers to only roll it out on a larger scale when the pilot phase has tangible success. We estimate margin improvements of 0.5ppt to 1ppt as more direct sourcing and higher warehouse utilisation materialise. Its dividend policy of 90% payout ratio that expires in FY14 will be closely watched as it is what makes SSG a yield play.
We think possibility of property acquisitions might prompt management to rethink whether they should retain more earnings instead. Due to a change in analyst and assumptions, we maintain BUY but lower our fair value estimate from S$0.78 to S$0.70. This is mainly because of updated higher cost of equity. (Research Team)
...last: $0.600...
Solidsnake ( Date: 05-Feb-2014 15:54) Posted:
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My fave dividend stock is Transpac.
Strictly dividend play.
Check out their payouts for the past few years.
Happy CNY!
heisuke ( Date: 05-Feb-2014 14:45) Posted:
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worth it to buy just to collect dividend in may?
ztwiscum ( Date: 03-Feb-2014 21:10) Posted:
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Tempest ( Date: 03-Feb-2014 19:54) Posted:
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