&bull Revenue rose 14.4% yoy to S$415.5 million, driven by new store openings and an improvement in comparable same store sales.

&bull Gross profit margin improved 0.2 percentage points yoy to 31.5% due to a better product mix.

&bull The Group opened four stores in 3Q FY2025, one store at Blk 221 Mount Vernon Rd in October, and plans to open another store at Leisure Park Kallang in 4Q FY2025. 

 

Mr Lim Hock Chee, the Group&rsquo s Chief Executive Officer, said, &ldquo The Group&rsquo s results over the recent quarters are a testament to our resilience against economic uncertainties. In September, we accepted JTC&rsquo s offer to lease a new site at Sungei Kadut to establish a new distribution centre and headquarters. With an expected capacity to support 120 supermarkets, the new distribution centre marks a significant milestone to support our continued expansion.

 

The Group opened four stores in 3Q2025 and another store at Blk 221 Mount Vernon Rd in October, raising the total number of new stores opened in 2025 to 10, and the year-to-date store count in Singapore to 85. Looking ahead, we will continue to prioritise expansion in areas where the Group has limited presence, to extend our reach to customers and deliver sustainable value to our shareholders. Currently, one additional store at Leisure Park Kallang is scheduled to open in 4Q2025.

 

The Group will also continue to enhance operational efficiency, maintaining prudent cost management to navigate operational pressures.&rdquo

• On-site visit of inaugural CBD store in The Cathay indicates viable new store concept and identifies less popular CBD malls as potential strategic expansion white space
• Up to 55 HDB store opportunities available through a combination of tenders at new BTO estates and relinquished stores
• SGD520mn distribution centre (DC) investment planned to support store growth ambitions, with est. annual depreciation in range of SGD26-28mn
• Raise TP to SGD2.60 on higher fwd PE of 23.7x, justified by est. 10% long-term EBIT margin 

 

Sheng Siong Group (SSG) has budgeted SGD520mn for a new 1.6mn sqft distribution centre (DC) slated for completion by end-2029. Designed to support at least 120 stores, the DC expands SSG&rsquo s logistics capacity and network reach. In this report, we address three key questions: (i) why the DC is necessary, (ii) what the investment implies for earnings, and (iii) how investors should assess SSG&rsquo s value in light of the DC.

Why is the new DC necessary?
Existing facility operating close to maximum capacity.  The current DC, completed in 2011, was originally designed to support 50 stores. Over the years, the company has invested in equipment upgrades and warehouse expansion to improve its capacity. We estimate the optimal capacity at ~70 stores. With 85 stores projected by year-end, the company is likely operating at near maximum capacity. Going forward, headroom for margin expansion could be more limited as the company will face capacity constraints regarding opportunistic buying. 

Ambition to grow to 120 stores and beyond.  As highlighted in its press release, the company expects the new DC to support at least 120 stores. Considering the utilisation of its existing DC, we believe the new one could comfortably support a meaningfully higher number of stores.

Provide additional lease runway and operational competitiveness.  Beyond boosting capacity, the new DC extends the master lease to 2058, adding 19 years compared to the current facility, which expires in 2029. It also strengthens the company&rsquo s ability to compete with NTUC FairPrice, which has upgraded its supply chain in recent years. This includes, most notably, a state-of-the-art fresh food distribution centre of about 750,000sqft completed in 2021 for over SGD23mn, and the signing of an agreement to add 30 autonomous vehicles to its distribution fleet in Oct 25.

Where do we see store count growth?
We see three key sources of new stores: (i) CBD malls, (ii) BTO sites, and (iii) relinquished stores.

CBD malls
Format of new CBD store seems well-received, opening room for potential expansion in select CBD malls.  On our visit to Sheng Siong&rsquo s first CBD outlet at Orchard (The Cathay), we observed: (i) an expanded ready-to-eat range tailored to office workers (see Fig 1) (ii) increased sponsored shelving that can drive incremental trade income (see Fig 2) and (iii) a high proportion of self-checkout lanes to optimise labour productivity (see Fig 3). Mid-weekday footfall appeared healthy for The Cathay, despite strong competition from the better situated Plaza Singapura nearby.

BTO sites
New estates provide lucrative new store opportunities.  Based on our comprehensive review of HDB site plans for upcoming BTO flats, we identified 26 supermarket tenders over the next four years (see Chart 1). Beyond the sheer number, the mapped locations show limited nearby competition, suggesting attractive unit economics (see Fig 1). Drawing on the past five years, we estimate Sheng Siong&rsquo s tender win rate at about 67% (see Chart 2), which implies securing roughly 17 of the 26 sites, or about four stores a year, in line with the company&rsquo s target of three to five annually.

Relinquished stores
U Stars and Hao Mart suffering significant losses and could relinquish more stores in coming years as they exit the market.  Based on their latest published financials, both businesses are generating negative cash flow (including lease liability payments) and are sustained by fresh shareholder injections. U Stars reported a SGD25mn loss and SGD16mn negative operating cash flow in FY23 (year ended 31 May). Hao Mart similarly reported a SGD32mn loss and SGD9mn negative operating cash flow in FY24 (year ended 31 Mar). Together, they operate 28 HDB stores and 2 private outlets, which could become takeover opportunities for Sheng Siong.

Overall, there could be up to 54 HDB store opportunities (26 stores in new BTOs and 28 from competitors) and 2 private outlet opportunities in the coming years

How will the SGD520mn investment be allocated, and what are the implications for earnings?
Majority of depreciation attributable to building and equipment.  While no specifics were shared, based on publicly available information, we estimate the potential range of the breakdown in Table 1. Accordingly, we estimate the company could incur annualised depreciation costs ranging from SGD26mn to SGD28mn  post commencement of operations at the DC in late 2029.

Mandated sale of existing DC when new DC is operational could fetch SGD100mn to offset investment cost.  As part of the agreement with JTC for the Sungei Kadut land, Sheng Siong is expected to sell the existing facility within two years from the date of the temporary occupation permit of the Sungei Kadut Property or by 17 Dec 31, whichever is earlier. Based on CommercialGuru, the rental rates for similar sized asset range between SGD14mn to SGD16mn per annum. With a nine-year lease remaining and an option to renew for another 30 years, should the company sell the asset in early 2030 at 6% discount rate, we estimate the company could earn around SGD100mn from the sale.

Expect long-term operating margin to land closer to 10%.  As highlighted in our previous  deep-dive report, we believe the current operating margin at the ~11% level could be unsustainable due to the need for capacity expansion to support growth. Based on our estimates, we believe the company could sustain an operating margin at the 9.5% to 9.9% level in 2030 when the DC is operational (see Table 2). 

What&rsquo s a fair valuation for the company?

Maintain BUY with higher TP of SGD2.60.  We believe the company deserves a valuation premium at 23.7x fwd PE based on an estimated normalised long-term EBIT margin of ~10%. Our conviction is anchored by a statistical analysis of developed market peer valuations, which indicated that the EBIT margin explains the majority of fwd PE valuation (see Chart 3). Moreover, as a highly liquid and well-managed company, we believe SSG will be a key beneficiary of MAS EQDP funding.

The location will be able to support the 120 supermarkets

 

[SINGAPORE] Supermarket operator   Sheng Siong   : OV8 -1.42% is set to move its headquarters, warehouse and distribution centre to a new site in Sungei Kadut to support its expansion plans.  

 

On Thursday (Sep 25), Sheng Siong said that the move aligns with its plans to add three new stores each year over the next 10 to 15 years and to expand and enhance its long-term warehouse management and logistics capabilities.

 

The Sungei Kadut property, which can support at least 120 supermarkets, is 2.5 times bigger than the company&rsquo s Mandai Link site, which currently houses its headquarters, warehouse and distribution centre. 

 

The Mandai property, initially designed to serve only around 50 supermarkets, was expanded in 2021. As Sheng Siong continues to expand, its supermarket network in Singapore will soon exceed the Mandai facility&rsquo s capacity, the company said.  

 

At 61,297 square metres, and with a maximum gross plot ratio of 2.5, the new site will have multiple temperature-controlled storage zones and integrated food-processing capabilities.

 

To support its expansion, Sheng Siong also intends to adopt new technology that reduces manual handling, minimises error and increases workplace safety. This will strengthen its warehouse management operations and improve cost efficiency, the group said.

 

To this end, investments will be made in advanced warehousing and distribution automation technology, such as automated storage and retrieval systems, robotics and smart inventory management. 

 

On Wednesday, Sheng Siong&rsquo s wholly owned subsidiary CMM Marketing Management accepted an offer by JTC Corporation to lease the Sungei Kadut property. There was also a related offer from JTC in relation to the assignment of the Mandai Link property to Sheng Siong&rsquo s other wholly owned subsidiary, MDL Property. 

 

JTC&rsquo s granting of the lease of the Sungei Kadut property to CMM is conditional upon several requirements being satisfied. 

 

The lease for the Sungei Kadut property is expected to run for 33 years, contingent upon conditions. It begins on Dec 18, 2025, but Sheng Siong will be granted possession of the property around two months before that. Rent will be free before the commencement date. 

 

CMM is required to fulfil a declared investment of at least S$120 million within four years from Dec 18, 2025, on new plant and machinery. 

 

The estimated investment cost for the new property is around S$520 million and will be funded by internal resources, as well as external financing, including borrowing, Sheng Siong said. 

 

This sum covers rent for the lease term alongside costs for plant and machinery, building and construction, as well as installing solar panels, among other expenses.

Revenue grows 7.1% to S$764.7 million, from S$714.2 million

 

[SINGAPORE] Supermarket operator Sheng Siong : OV8 -0.47% reported a 3.5 per cent increase in H1 2025 net profit to S$72.3 million, from S$69.9 million in H1 2024 on Wednesday (Jul 30).

 

Revenue for the period grew 7.1 per cent to S$764.7 million, from S$714.2 million. This was mainly driven by the opening of 11 new stores in the first half of 2025 and in 2024.

 

Gross profit also rose 9.6 per cent to S$235.6 million, from S$215 million. Gross profit margins increased to 30.8 per cent, from 30.1 per cent. The improvements were driven by a better sales mix and efforts to mitigate rising business operation costs.

 

The board of directors proposed an unchanged interim dividend of S$0.032 per share, payable on Aug 29.

 

&ldquo Backed by a store count of 82 as of July 2025, we will continue to prioritise expansion in areas where the group has limited presence,&rdquo said Lim Hock Chee, CEO, Sheng Siong.

 

Macroeconomic uncertainties, cautious consumer spending and a tight labour market are some challenges ahead for the supermarket operator. Regulatory requirements such as sustainability and climate reporting are also expected to add to operational expenses.

 

Sheng Siong will prioritise improving its sales mix while looking to technology to enhance efficiency and productivity.

 

&ldquo In parallel, we remain focused on strategically tendering for new stores to further strengthen our presence and extend our reach to deliver sustainable value to our shareholders,&rdquo said Lim.

Rival DFI&rsquo s S$125 million sale of Singapore Cold Storage, Giant grocers may allow Sheng Siong to gain market share

 

[SINGAPORE] Maybank has initiated coverage on supermarket operator Sheng Siong, assigning it a &ldquo buy&rdquo call and a target price of S$2.30. 

 

This represents a premium of 10.6 per cent over its last closing price of S$2.08 on Friday and implies a price-to-earnings ratio of 23 times for 2025 and 21 times for 2026. 

 

In a report on Sunday (Jun 20), Maybank analyst Hussaini Saifee wrote: &ldquo Rival DFI Retail Group&rsquo s S$125 million sale to Malaysia&rsquo s Macrovalue signals a retreat from Singapore&rsquo s supermarket space and, in our view, creates a market share opportunity for Sheng Siong.&rdquo  

 

Jardine Matheson-owned DFI had in March announced the sale of its Singapore food business, including 48 Cold Storage and 41 Giant stores, to the Malaysian conglomerate.

 

Sheng Siong&rsquo s revenue could log a 6 per cent compound annual growth rate (CAGR) on the back of industry growth of 4 per cent and market share gains from its competitor&rsquo s restructuring, Saifee wrote. 

 

The group&rsquo s net profit after tax is estimated to grow at a CAGR of 8 per cent, which is &ldquo highly defensible&rdquo and places it in the upper-tier of domestic names and regional peers, he added.  

 

Market share opportunity on DFI retreat

The ongoing restructuring of Sheng Siong&rsquo s competitors, amid Macrovalue&rsquo s takeover of DFI&rsquo s Cold Storage and Giant stores, presents an opportunity for &ldquo medium-term growth in market share&rdquo , Saifee wrote. 

 

&ldquo In the past three years, Sheng Siong has gained 2.7 percentage points in revenue share and could benefit further if Macrovalue prioritises Cold Storage over Giant due to capital constraints,&rdquo he wrote. 

 

Giant&rsquo s focus on the mass market segment would mean that its ongoing rationalisation would likely benefit Sheng Siong, which targets a similar customer base, he added. 

 

&ldquo Our mapping shows a 68 per cent chance of Sheng Siong gaining over NTUC from potential Giant closures,&rdquo Saifee said.  

 

This comes as Sheng Siong remains focused on expansion, with the group opening six to 10 stores over 2024 and 2025, he said. 

 

&ldquo We expect Sheng Siong to add five to six new stores in 2026 to 2027, partially helped by (Giant&rsquo s) rationalisation.&rdquo  

 

Limited leakage from e-grocery competition

Saifee noted that leakage from competition posed by online grocers should be &ldquo limited&rdquo .

 

He noted that Singapore&rsquo s e-grocery market is already mature (with) 80 per cent of residents already (shopping) online, limiting further structural shifts.  

 

Moreover, offline groceries have been predicted to grow at a CAGR of 3 per cent for 2024 to 2029, matching gross domestic product, he said. 

 

&ldquo The city&rsquo s compact layout supports in-person shopping. Sheng Siong&rsquo s prices are 10 per cent to 21 per cent lower than e-grocers, and its fresh offerings, live seafood, and long hours drive footfall.&rdquo  

 

Additionally, food trends such as consumers cutting back on delivery due to higher costs should support the stable growth of supermarkets, he said. 

Analysts note that the supermarket operator has managed to achieve industry-leading margins through a no-frills, disciplined investment approach

[SINGAPORE] DBS Research Equity on Tuesday (Jun 10) raised its target price for Sheng Siong : OV8 0% to S$2.30 from S$2 on the back of strong earnings growth and resilient margins, despite a volatile macroeconomic environment.

 

The brokerage also maintained a &ldquo buy&rdquo rating, with the revised target implying a 25 per cent upside from its last traded price of S$1.84 on Thursday.

 

Bank analysts Chee Zheng Feng and Andy Sim noted that the supermarket operator had managed to achieve &ldquo industry-leading margins through a no-frills, disciplined investment approach&rdquo .

 

Sheng Siong had one of the leanest cost structures among grocery retailers globally, they added. It still remained relevant to domestic consumers despite minimal investments made in marketing, e-commerce platforms and membership programmes &ndash in contrast to its peers. For instance, DBS noted, it held a margin superiority over NTUC FairPrice with supply chain efficiency and sharper pricing. Sheng Siong also benefits from having a single centralised distribution centre, as compared to NTUC&rsquo s diversified sourcing.

 

Furthermore, in light of the supermarket operator&rsquo s projected store network expansion, DBS also expects to see earnings growth.

 

Already, in its first quarter ended Mar 31, Sheng Siong recorded a 6.1 per cent increase in net profit to S$38.5 million. Its revenue grew 7.1 per cent to S$403 million, from S$376.2 million in the corresponding period the previous year.

 

These gains were contributed by the eight stores which opened in the quarter and in FY2024. There are six additional locations secured and scheduled to open in its third quarter, and the group is awaiting the results of another four tenders.

 

&ldquo Sheng Siong has maintained stable margins in Q1 2025, reflecting good cost control and gross margin improvement through better economies of scale and procurement efficiencies,&rdquo noted Chee and Sim, amid investor concerns about the sustainability of operating margins with rapid expansion.

 

The analysts added that network expansion will drive both revenue and margins over the next two to three years.

 

The company is exploring private site opportunities and asset acquisitions outside its usual approach of setting up shop within the heartlands.

 

While only one supermarket is expected to open in a new Build-To-Order estate in 2026, the DBS analysts still expect the influx of new households into these new estates to contribute S$69.3 million in incremental revenue.

 

DBS also foresees the S$1.1 billion in SG60 supermarket vouchers to lift industry-wide demand.

 

The bank raised its target price-to-earnings ratio to 20.9 times, from 19 times, for FY2026 on Sheng Siong&rsquo s stable growth prospects.

 

Added the analysts: &ldquo In today&rsquo s volatile macroeconomic environment, we believe investors will continue to assign a higher valuation to well-managed, stable companies like Sheng Siong.&rdquo

Sheng Siong group' s planned store openings for FY2025 have led to a positive sentiment among analysts.

 

Citi Research analyst Gan Huan Wen has a " buy" call on the stock, with a raised target price (TP) $2.05 from $1.90 previously.

 

He writes in his April 30 report: " Sheng Siong' s six new stores in the pipeline will take full year store additions to eight, much higher than previously guided minimum of three.

 

Sheng Siong has won four out of the six recent HDB tenders, with another two stores planned to open in retail malls Kinex and The Cathay.

 

On this, Gan notes: " We understand all but one of these stores were previously operated by a competitor. We are positive on this, given locations with former supermarket tenants generally have a quicker payback period."

 

He also expects Macrovalue, the recent acquirer of Cold Storage and Giant, to give up unprofitable store locations, paving the way for Sheng Siong to open even more stores.

 

On the Sheng Siong' s results, Gan expects staff costs to drag the group' s 2QFY2025 gross profit margins, which should continue to edge up as they continue to grow sales mix of perishables and optimize procurement.

 

However, the analyst anticipates Sheng Siong' s 2QFY2025 earnings to be softer q-o-q from the absence of Chinese New Year and Hari Raya festive earnings in addition to increased staff cost in preparation for newer stores.

 

Meanwhile, CGS International' s (CGSI) Meghana Kande and Lim Siew Khee are keeping " add" at an unchanged TP of $1.90, as are DBS Group Research' s Chee Zheng Feng and Andy Sim with their " buy" call, albeit at a raised TP of $2.00 from $1.90 previously.

 

CGSI' s Kande and Lim note that Sheng Sion' s 1QFY2025 profit after tax and minority interests (patmi) of $38.6 million was a slight beat at 27% of both their and Bloomberg consensus' FY2025 estimates.

 

Revenue in the period grew 7% y-o-y to $403 million, outperforming the national supermarket industry' s 0.4% y-o-y decline in the 2MFY2025.

 

They write: " This was driven by solid contribution from eight new stores opened since January. Same store sales were broadly flat yoy, which management attributed to some normalisation in mature outlets and lower average selling prices (ASP) for fresh products."

 

On the group' s store openings, Kande and Lim expect Sheng Siong to target the mass market with slight changes to sales mix based on local demographics.

 

They write: " Given four more tenders pending, we now expect Sheng Siong to open 10 new stores in FY2025- its highest since 2018."

 

" While we think upfront staffing and rental expenses for new stores could weigh on FY2025 earnings growth, we expect operating leverage to kick in from FY2026," add the analysts.

 

With this, the DBS analysts trim their earnings per share (EPS) estimate for FY2025 by 1% ahead of store openings but raise their FY2026 and FY2027 EPS by 2% and 5% respectively as they expect contribution from new stores to pick up.

 

Kande and Lim write: " We reiterate our ' add' call as we continue to like Sheng Siong for its 4% to 6% earnings growth over FY2025 to FY2027 from an expanded store base."

 

Re-rating catalysts noted by them include an increase in HDB new store tenders and potential wage support by the government to alleviate escalating staff costs.

 

Conversely, downside risks include a tight supply of front-line service personnel increasing its staff costs and stiffer price competition.

 

Lastly, DBS' s Chee and Sim have revised their 1QFY2025 gross margin assumption upwards from 30.7% to 31.2%, supported by stronger economies of scale.

 

They add: " However, higher staffing and operating costs from store expansion led to us raising our operating expense ratio from 20.6% to 21.0%, effectively offsetting gross profit gains. We therefore maintain our FY2025 earnings forecast."

 

On Sheng Siong' s store openings, Chee and Sim have revised their gross margin estimate from 30.9% to 31.7%, reflecting continued scale efficiencies.

 

In addition, they have also adjusted the group' s operating expenses slightly from 21.0% to 21.1%.

 

" Net-net, we expect FY2026 earnings to come in 2.5% higher than our previous forecast," write the analysts.

 

Overall, Chee and Sim' s higher TP stems from Sheng Siong' s strong growth outlook, underpinned by a record 16 store openings across 2024-25 and an anticipated industry uplift from SG60 voucher disbursements in the 2HFY2025 and 1HFY2026.

 

One key risk noted by the pair is operational costs continuing to outpace gross profit growth.

 

Finally, PhillipCapital analyst Paul Chew, like his fellow analysts, has maintained his " accumulate" call at a raised TP of $1.89 from $1.76 previously.

 

He writes: " We believe Sheng Siong is gaining share and scale as competitors turn more subscale. The capture of market share and new stores will offset the soft same-store sales by around 1%. Wage inflation remains the most significant cost challenge due to the tight labour market, especially for locals."

 

He adds that the impact of the global trade war on the group is minimal, apart from changes in trade routes impacting the availability of containers.

Revenue is up 7.1%, driven by the opening of eight new stores

 

[SINGAPORE] Supermarket operator Sheng Siong : OV8 -0.57% recorded a 6.1 per cent increase in net profit to S$38.5 million for the first quarter ended Mar 31, from S$36.3 million the year before.

 

Revenue grew 7.1 per cent to S$403 million, from S$376.2 million in the corresponding period last year. This was thanks to contributions from eight new stores opening in the quarter and FY2024, as well as higher festive sales during Hari Raya in March, said the company in a business update on Tuesday (Apr 29). 

 

Gross profit consequently rose to S$122 million in Q1, a 10.2 per cent increase from the S$110.7 million posted the year prior. 

 

Earnings per share stood at S$0.0257, up 6.2 per cent from S$0.0242 in the year-ago period. 

 

The improved performance came despite operating costs rising 12.4 per cent to S$81.6 million. This was mainly due to an 8.8 per cent year-on-year increase in administrative expenses to S$15.8 million, and a 13.3 per cent rise in selling and distribution expenses to S$65.8 million.

 

Sheng Siong attributed these to higher staff costs from higher variable bonuses, which was in turn from a better financial performance, enhanced employment benefits and more employees hired for the new stores. 

 

Cash flow from operating activities fell by S$10.1 million, from more payments being made to banks and vendors during the quarter. Still, cash flow generated in the quarter rose by 3.8 per cent from the year before to S$366.9 million. 

 

Sheng Siong chief executive officer Lim Hock Chee predicts continued macroeconomic uncertainty amid geopolitical tensions. 

 

&ldquo Under this unpredictable environment, consumers will remain cautious and continue to prefer value-driven supermarkets and affordable house brand products,&rdquo he said. &ldquo Government support measures, including various vouchers and financial subsidies, will help to maintain consumer spending momentum and benefit supermarket sales.&rdquo  

 

Lim cited the attracting and retaining of qualified staff, increased investment costs and enhanced regulatory reporting as likely challenges that will strain the business margins of the retail industry.

 

&ldquo To navigate the complex environment, the group will continue to examine and expand its supply chain, refine the sales mix and focus on its core competence to optimise operational efficiency and productivity,&rdquo he said. 

 

&ldquo Despite the external challenges, we remain confident in our ability to grow and strengthen our presence in the years ahead.&rdquo For instance, six additional retail locations have been secured and are expected to open by the third quarter of this year. The group is awaiting the results of another four tenders.

 

&ldquo We continue to monitor suitable opportunities to expand our network and which align with our long-term strategy,&rdquo said Lim.