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(15-01-2015, 08:44 PM)misscambodia Wrote: [ -> ]Sheng Siong: Can Company Continue To Sustain Its Growth Path in 2015?


12 January 2015



Sheng Siong Group Ltd. (OV8) is one of Singapore's largest grocery retailers with 33 stores located all across the island. To date, they have over 400 products under 10 house brands. In the third quarter of 2014, the company reported revenue of $186.4 mil, an increase of 4.8% year on year. Profit for the period rose 15.4% year on year to $12.2 mil. On a year to date basis, revenue and profit are up 5.9% and 21.0% respectively year on year. In addition, over a 3 year period, revenue and profits have been growing at 5.9% and 12.5% each year on average.

With respect to its stock performance, the share price of Sheng Siong has doubled since 2011 and is currently trading at $0.70, which is 7% below its 52 week high of $0.85 and 21% higher than its 52 week low of $0.58. At its current price, this translates to a PE of 27.1 based on its latest full year earnings, and 22.0 based on its year to date earnings on an annualised basis. The current PE of 22 is considered relatively high and can only be justified if the company continues to deliver on its growth strategy. One other thing to note is also that the company has not have any debt.

I am not sure how far can the company goes...I think more or less stagnant here locally already, market is just limited

(15-01-2015, 08:44 PM)misscambodia Wrote: [ -> ]Sheng Siong: Can Company Continue To Sustain Its Growth Path in 2015?

12 January 2015

Sheng Siong Group Ltd. (OV8) is one of Singapore's largest grocery retailers with 33 stores located all across the island. To date, they have over 400 products under 10 house brands. In the third quarter of 2014, the company reported revenue of $186.4 mil, an increase of 4.8% year on year. Profit for the period rose 15.4% year on year to $12.2 mil. On a year to date basis, revenue and profit are up 5.9% and 21.0% respectively year on year. In addition, over a 3 year period, revenue and profits have been growing at 5.9% and 12.5% each year on average.

With respect to its stock performance, the share price of Sheng Siong has doubled since 2011 and is currently trading at $0.70, which is 7% below its 52 week high of $0.85 and 21% higher than its 52 week low of $0.58. At its current price, this translates to a PE of 27.1 based on its latest full year earnings, and 22.0 based on its year to date earnings on an annualised basis. The current PE of 22 is considered relatively high and can only be justified if the company continues to deliver on its growth strategy. One other thing to note is also that the company has not have any debt.

I have posted before, on valuation of Sheng Siong, base on PE multiple, and the near term growth drivers.

Let's approach the same with EV/EBITDA approach.

Since the listing of the company in 2011 to 2013, the EBITDA has grown in 17-19%, and EBITDA margin also has improved from 7% to more than 8% in 2013.

The EV of the company @ 70 cents is estimated as $873 mil, with the following parameters
- share base of 1503.5 mil share, MC = $1052 mil
- debt nil
- cash $179 mil

The forward estimated of 2014's EBITDA is approx $67 mil, thus give a EV/EBITDA of 13.

Is the forward EBITDA of $67 mil realistic?
The 9 months EBITDA was approx $51 mil. Base on the average 18% growth rate, the 2014's EBITDA is estimated as $67 mil, base on 2013's $56 mil. It should be realistic, IMO

Is the EV/EBITDA of 13, a fair value?
It should be a fair value, IMO.

(vested)

Daiwa analyst view on the company China venture. The success of the business model depends on asset-turn-over. If a company can sell $4 of goods, with every $1 of invested capital in a year i.e. asset turnover of 4, even with a thin margin of 5%, it means ROIC of 20%.

(vested, and cautiously optimistic on the China venture)

Sheng Siong's venture into China to yield 'satisfactory' return: Daiwa

SINGAPORE (Jan 28): Profit margins for supermarket operators in China may be thin, but Sheng Siong Group can still expect a decent return from doing business in Asia's biggest economy, according to Daiwa.

The company firmed up plans last month for a joint venture with Kunming LuChen Group, a condiments maker, to operate supermarkets in the country.

Sheng Siong will own 60% of the new entity, which will have a registered capital of US$10 million ($13 million), while LuChen will have a 30% stake. Sheong Siong executive director Tan Ling San will own the remaining 10%.

"Given that its capital-at-risk in this JV is relatively low (US$6 million), we believe Sheng Siong’s expansion into China could be positive for the company in the coming years," Daiwa analysts Jame Osman and Ramakrishna Maruvada wrote in a note.

Sheng Siong plans to open a store in Kunming in 2H2015, they noted, citing feedback from the company's management.

"Sheng Siong intends to replicate its Singapore model of operating supermarkets in suburban areas with an emphasis on fresh foods, in order to obtain revenue market share from traditional ('mom and pop') grocery stores," they said.

"Management is cognisant of the thin operating margins for supermarkets generally in China, but remains confident that it will be able to generate satisfactory ROE (return on equity) levels given the low capital requirements."

Daiwa has an "outperform" rating and a price target of 80 cents on the stock.

Sheng Siong shares rose 0.7% to 71.5 cents at 11:57am (0357 GMT).
http://www.theedgemarkets.com/sg/article...turn-daiwa

(02-01-2015, 10:27 AM)CityFarmer Wrote: [ -> ]

(31-12-2014, 07:38 PM)Dividend Warrior Wrote: [ -> ]I am optimistic that the new store will be ready in time to capture the Chinese New Year crowd.

Base on the disclosure

"The Group intends to open a new supermarket with a gross floor area of approximately 9,800
square feet on the second floor of the Property, which is expected to commence operations
by the end of January 2015"

It should be ready in time for CNY, in Feb 2015

It's actually already opened with little fanfare, occupying the old Giant. I suspect it's temporal until they can renovate the place after the other leases expires

(28-01-2015, 05:16 PM)CityFarmer Wrote: [ -> ]Daiwa analyst view on the company China venture. The success of the business model depends on asset-turn-over. If a company can sell $4 of goods, with every $1 of invested capital in a year i.e. asset turnover of 4, even with a thin margin of 5%, it means ROIC of 20%.

(vested, and cautiously optimistic on the China venture)

Sheng Siong's venture into China to yield 'satisfactory' return: Daiwa

SINGAPORE (Jan 28): Profit margins for supermarket operators in China may be thin, but Sheng Siong Group can still expect a decent return from doing business in Asia's biggest economy, according to Daiwa.

The company firmed up plans last month for a joint venture with Kunming LuChen Group, a condiments maker, to operate supermarkets in the country.

Sheng Siong will own 60% of the new entity, which will have a registered capital of US$10 million ($13 million), while LuChen will have a 30% stake. Sheong Siong executive director Tan Ling San will own the remaining 10%.

"Given that its capital-at-risk in this JV is relatively low (US$6 million), we believe Sheng Siong’s expansion into China could be positive for the company in the coming years," Daiwa analysts Jame Osman and Ramakrishna Maruvada wrote in a note.

Sheng Siong plans to open a store in Kunming in 2H2015, they noted, citing feedback from the company's management.

"Sheng Siong intends to replicate its Singapore model of operating supermarkets in suburban areas with an emphasis on fresh foods, in order to obtain revenue market share from traditional ('mom and pop') grocery stores," they said.

"Management is cognisant of the thin operating margins for supermarkets generally in China, but remains confident that it will be able to generate satisfactory ROE (return on equity) levels given the low capital requirements."

Daiwa has an "outperform" rating and a price target of 80 cents on the stock.

Sheng Siong shares rose 0.7% to 71.5 cents at 11:57am (0357 GMT).
http://www.theedgemarkets.com/sg/article...turn-daiwa

Sunart retail, one of the biggest Supermart and Hypermart operator in China is only getting 3-4% profit margin in 2013 and margins are getting squeezed. I doubt Sheng Siong will be able to surpass Sunart Retail's margins without the scale of Sunart.

(28-01-2015, 10:06 PM)Tiggerbee Wrote: [ -> ]Sunart retail, one of the biggest Supermart and Hypermart operator in China is only getting 3-4% profit margin in 2013 and margins are getting squeezed. I doubt Sheng Siong will be able to surpass Sunart Retail's margins without the scale of Sunart.

I don't know SunArt Retail, but glanced on its latest report after your post. You are right, SunArt Retail NPM is around 2-3%, and in a downtrend, with GPM of around 20%.

Economic of scale is one important factor, but it is a diminishing return. The key of SS success in China, is to operate on a niche, the same as in Singapore.

SS revenue is around S$600-700 mil annually, comparing with ~S$2.5 billion for NTUC, and US$10.4 billion for DairyFarm globally. (I don't have a exact breakdown, but Singapore should be around US$2.5 billion)

SS GPM and NPM is comparable to them, if not better. One important point to note is the asset turnover (ex cash) of SS is the highest among them. SS asset turnover ex-cash is ~5 since listed, while NTUC is ~2, and DairyFarm is ~4.

(vested)

If you study Wal-Mart, within the supermarket/hypermarket business there is benefit in scale, but one that is limited by geography. For every distribution center, there is a limited footprint of stores it can support. While the front-end matters (store placement etc), equally important is the supply-chain management. You don't need to be the biggest national retailer, but where you operate you do need to be competitive (front and backend) to any big boys coming in to the same market.

Relevant questions for AGM would be
1) how long will SS try?
2) what is the cut loss point and
3) who will make the decision and any penalty for the company.

The CIMB report gives a glimpse on the company China strategy...

CIMB raises Sheng Siong’s target price by 7 cents after earnings revision

SINGAPORE (Jan 29): CIMB ( Financial Dashboard) is maintaining its "Add" call on Sheng Siong Group (Financial Dashboard) but raised its target price (TP) by 7 cents to 84 cents from 77 cents after revising the group's FY15 and FY16 earnings per share (EPS) by 4% and 7% respectively.

In a research report today, CIMB has revised Sheng Siong's store growth assumptions to factor in recent new stores including the opening of 14,000 sq ft additional retail space in the past two months, which are located in Penjuru and Tampiness respectively.

According to CIMB, the government's initiatives to provide holistic living quarters for foreign workers and the potential closure of competitor stores were catalyst for its store growth.

"We believe store growth can surprise in 2015 and 2016 and we raise FY15 and FY16 EPS by 4% and 7%, which increases our target price," it said.

The revision is on the back of the return of store growth in Singapore, which will mute concerns over the risk of throwing capital into China growth plans, the house added.

According to the house's projection, Sheng Siong is expected to pull in $52.22 million in net profit on the back of revenue $782.5 million in FY15. The number continue to expand in FY16 to $57.46 million and $855.9 million repsectively in FY16.

On Sheng Siong's China expansion, CIMB remained catious on the China joint venture.

According to the house, Sheng Siong's management has indicated that it will be looking to lease retail space and open 1 to 2 stores in Kunming.

"We understand that investors are concerned that this will burn a capital hole. Management is very clear in guiding that it will not buy stores and will limit its investment to US$6 million," it said.

CIMB continued to value Sheng Siong at its average 12 month forward price to earnings ratio (P/E) of 22 times, which is slightly below the average of a supermarket peer comparison.

The house deemed Sheng Siong's current valuations of 20.4 times calendar year 2015 (CY15) P/E and 18.6 times CY16 P/E as attractive levels to buy the stock.

As of 10.20am, Sheng Siong was traded at 72 cents , up 1 cent or 1.41%, giving it a market capitalisation of $1.07 billion.
http://www.theedgemarkets.com/sg/article...s-revision

Look at the financial numbers i really like Sheng Siong and many time wanted to buy some shares. But somehow whenever i visitted the store at Serangoon North i was put off by the smell and the store arrangement and i wonder how could Sheng Shiong can scale up for growth so decided against buying their shares.

I already missed some good profit.