30-10-2014, 11:44 AM
JP Morgan TP 82 cts.
https://markets.jpmorgan.com/research/em...-1529556-0
3Q14 results: Steady operational performance, slight miss on earnings due to higher wage provision
· Operating performance remains steady: Sheng Siong reported 3Q net profit growth of 15.4% YoY, about 5% below our estimate, missing mainly due to higher provision for employee bonuses linked to financial performance of the company and higher-than-expected tax rate. Operating parameters remained steady with 4.8% YoY growth in revenues (JPM estimate of 5% YoY growth). Same-store sales growth in 3Q was 3.4%, broadly in line with our expectations. Total retail area remained steady at 400K sq.ft with no new outlets opened in 3Q.
· Gross margin expansion continues: Gross margin in 3Q expanded 100bps YoY to 24.2%, continuing the trend from the past few quarters. Better product mix (rising share of fresh food), better sourcing and higher share of private label products is driving gross margin improvement, a trend we expect to continue. 3Q EBIT grew 16.6% YoY, with EBIT margins expanding 80bps.
· New store opening in 4Q14, after a 6 quarter hiatus: Sheng Siong has signed a new store lease for 4000 sq.ft of space located in an amenity centre for foreign workers in the Penjuru area. This store is expected to be operational by November 2014 and should aid revenue growth in 4Q. However, management has noted that competition for retail space in new HDB areas remains challenging and the company is evaluating opportunities to purchase real estate.
· Cash generation remains strong: Sheng Siong has generated free cash (post interim dividend payout) of SGD79m over 9m2014 and has total cash balance of SG$179m as of end 3Q. We believe the company is on track to maintain its dividend payout at historical levels of about 90% going forward. We estimate dividend yield of 6.3% for 2015/16E, based on our estimates.
(Vested)
https://markets.jpmorgan.com/research/em...-1529556-0
3Q14 results: Steady operational performance, slight miss on earnings due to higher wage provision
· Operating performance remains steady: Sheng Siong reported 3Q net profit growth of 15.4% YoY, about 5% below our estimate, missing mainly due to higher provision for employee bonuses linked to financial performance of the company and higher-than-expected tax rate. Operating parameters remained steady with 4.8% YoY growth in revenues (JPM estimate of 5% YoY growth). Same-store sales growth in 3Q was 3.4%, broadly in line with our expectations. Total retail area remained steady at 400K sq.ft with no new outlets opened in 3Q.
· Gross margin expansion continues: Gross margin in 3Q expanded 100bps YoY to 24.2%, continuing the trend from the past few quarters. Better product mix (rising share of fresh food), better sourcing and higher share of private label products is driving gross margin improvement, a trend we expect to continue. 3Q EBIT grew 16.6% YoY, with EBIT margins expanding 80bps.
· New store opening in 4Q14, after a 6 quarter hiatus: Sheng Siong has signed a new store lease for 4000 sq.ft of space located in an amenity centre for foreign workers in the Penjuru area. This store is expected to be operational by November 2014 and should aid revenue growth in 4Q. However, management has noted that competition for retail space in new HDB areas remains challenging and the company is evaluating opportunities to purchase real estate.
· Cash generation remains strong: Sheng Siong has generated free cash (post interim dividend payout) of SGD79m over 9m2014 and has total cash balance of SG$179m as of end 3Q. We believe the company is on track to maintain its dividend payout at historical levels of about 90% going forward. We estimate dividend yield of 6.3% for 2015/16E, based on our estimates.
(Vested)