Analyzing stock with a structure approach, is a pending task of mine. My first attempt is on Sheng Siong.
Simplicity, is the theme. The simplicity, means stick to simple ratios and common senses. I like the simplicity of the Yeoman Cap's "3 Rights" principle. I would "copy" it, with an additional "category" to denote strategy used.
Attached is the first draft. All comments are welcome.
(vested)
Nice stuff, CF.
Not sure if you have the answer, but do you have some details on how the rental from HDB/JTC works? From the prospectus, I gather that the space is rented normally on a 3y or so lease, but how likely are they able to renew the leases successfully on maturity? Do they get priority as long as they are able to demonstrate use of the space or do they have to engage in competitive tender all over again? Also, what are the new lease terms like on renewal - is it some escalation clause, prevailing rents or something else?
Unfortunately can't find IR for ShengSiong for enquiries.
(24-03-2015, 09:03 PM)AQ. Wrote: [ -> ]Nice stuff, CF.
Not sure if you have the answer, but do you have some details on how the rental from HDB/JTC works? From the prospectus, I gather that the space is rented normally on a 3y or so lease, but how likely are they able to renew the leases successfully on maturity? Do they get priority as long as they are able to demonstrate use of the space or do they have to engage in competitive tender all over again? Also, what are the new lease terms like on renewal - is it some escalation clause, prevailing rents or something else?
Unfortunately can't find IR for ShengSiong for enquiries.
I don't have the detail, but base on general knowledge of HDB commercial renting.
There is always option available to renew tenancy for HDB renting, after accepted new term and condition from HDB (i.e. new rental). Of course, no violation of HDB rules during the tenancy.
Sheng Siong's renewals should be the same. The link from HDB below might be able to give some hints
http://www.hdb.gov.sg/fi10/fi10330p.nsf/...enDocument
(24-03-2015, 05:11 PM)CityFarmer Wrote: [ -> ]Analyzing stock with a structure approach, is a pending task of mine. My first attempt is on Sheng Siong.
Simplicity, is the theme. The simplicity, means stick to simple ratios and common senses. I like the simplicity of the Yeoman Cap's "3 Rights" principle. I would "copy" it, with an additional "category" to denote strategy used.
Attached is the first draft. All comments are welcome.
(vested)
Hi cityfarmer,
A few food for thought:
1. While Dairyfarm is the closest listed competitor to SS, being a regional operator with convenience stores make it less of a similar player. Should PE comparison be adjusted to a lower value considering higher potential growth for DF due to it's high margin and groeth market play?
2. Based on the writeup, can I say there is no MOS for SS since actual price is at 0.70+?
Is a very detailed write up by the way.
Sent from my D5503 using Tapatalk
(25-03-2015, 09:28 AM)thor666 Wrote: [ -> ] (24-03-2015, 05:11 PM)CityFarmer Wrote: [ -> ]Analyzing stock with a structure approach, is a pending task of mine. My first attempt is on Sheng Siong.
Simplicity, is the theme. The simplicity, means stick to simple ratios and common senses. I like the simplicity of the Yeoman Cap's "3 Rights" principle. I would "copy" it, with an additional "category" to denote strategy used.
Attached is the first draft. All comments are welcome.
(vested)
Hi cityfarmer,
A few food for thought:
1. While Dairyfarm is the closest listed competitor to SS, being a regional operator with convenience stores make it less of a similar player. Should PE comparison be adjusted to a lower value considering higher potential growth for DF due to it's high margin and groeth market play?
2. Based on the writeup, can I say there is no MOS for SS since actual price is at 0.70+?
Is a very detailed write up by the way.
Sent from my D5503 using Tapatalk
Hi thor666,
Thanks for the feedback.
Valuation is always subjective. IMO, a PE of 25 is right for Sheng Siong after the following considerations
- DairyFarm has higher GPM, but lower NPM comparing with Sheng Siong. DairyFarm overall GPM is approaching 30%, while NPM is about 4.5%, comparing with Sheng Siong of 24.2% and 6.6% respectively. DairyFarm supermarket business is about half of the overall sales, while other business are typical having higher GPMs.
- DairyFarm has been re-rated recently, due to its lower growth rate. From a 10-15% growth, to slightly more than 5% in the last 3 years. The PE was downgraded from previously about 30 to about 25 recently. Sheng Siong projected growth rate should be higher than 10% going forward.
- I agree Sheng Siong should be valued slightly lower than DairyFarm, as a pure local play.
- It is also consistent with a dividend yield of about 4%
At current price of 78 cents, it is a fair price, IMO
I has vested, @ price <60 cents, when the PE was around 20.
(vested)
Finally hit $0.80
I believe the earnings will continue to grow, provided the profit margin can be maintained.
Acquiring retail space instead of renting is potentially a shrewd long-term move by the management.
(24-03-2015, 09:21 PM)CityFarmer Wrote: [ -> ] (24-03-2015, 09:03 PM)AQ. Wrote: [ -> ]Nice stuff, CF.
Not sure if you have the answer, but do you have some details on how the rental from HDB/JTC works? From the prospectus, I gather that the space is rented normally on a 3y or so lease, but how likely are they able to renew the leases successfully on maturity? Do they get priority as long as they are able to demonstrate use of the space or do they have to engage in competitive tender all over again? Also, what are the new lease terms like on renewal - is it some escalation clause, prevailing rents or something else?
Unfortunately can't find IR for ShengSiong for enquiries.
I don't have the detail, but base on general knowledge of HDB commercial renting.
There is always option available to renew tenancy for HDB renting, after accepted new term and condition from HDB (i.e. new rental). Of course, no violation of HDB rules during the tenancy.
Sheng Siong's renewals should be the same. The link from HDB below might be able to give some hints
http://www.hdb.gov.sg/fi10/fi10330p.nsf/...enDocument
I concur with what you said. Previously, I was also hunting for a place to start a shop. Then, my partner and I realised that many of the old uncles, aunties and others could have predictable lease renewals. This was when we discovered that this "option" to renew exists, assuming that the rules don't change.
Apparently, the earlier HDB lessees benefit too from the very low market rental rates too.
But, what I think makes this counter outstanding are:
1. Pricing power since they are often located where cold storage and ntuc are barely found nearby.
2. Economies of scale with their centralised distribution at mandai.
3. Nature of the goods is very inelastic. One can don't buy car, but cannot don't eat.
The thing which I am concerned about is the china expansion. SS is entering a market which Tesco couldn't conquer. How would they succeed where the giant failed? Would be interesting to know.
PS: Vested.
(25-03-2015, 10:24 AM)CityFarmer Wrote: [ -> ] (25-03-2015, 09:28 AM)thor666 Wrote: [ -> ] (24-03-2015, 05:11 PM)CityFarmer Wrote: [ -> ]Analyzing stock with a structure approach, is a pending task of mine. My first attempt is on Sheng Siong.
Simplicity, is the theme. The simplicity, means stick to simple ratios and common senses. I like the simplicity of the Yeoman Cap's "3 Rights" principle. I would "copy" it, with an additional "category" to denote strategy used.
Attached is the first draft. All comments are welcome.
(vested)
Hi cityfarmer,
A few food for thought:
1. While Dairyfarm is the closest listed competitor to SS, being a regional operator with convenience stores make it less of a similar player. Should PE comparison be adjusted to a lower value considering higher potential growth for DF due to it's high margin and groeth market play?
2. Based on the writeup, can I say there is no MOS for SS since actual price is at 0.70+?
Is a very detailed write up by the way.
Sent from my D5503 using Tapatalk
Hi thor666,
Thanks for the feedback.
Valuation is always subjective. IMO, a PE of 25 is right for Sheng Siong after the following considerations
- DairyFarm has higher GPM, but lower NPM comparing with Sheng Siong. DairyFarm overall GPM is approaching 30%, while NPM is about 4.5%, comparing with Sheng Siong of 24.2% and 6.6% respectively. DairyFarm supermarket business is about half of the overall sales, while other business are typical having higher GPMs.
- DairyFarm has been re-rated recently, due to its lower growth rate. From a 10-15% growth, to slightly more than 5% in the last 3 years. The PE was downgraded from previously about 30 to about 25 recently. Sheng Siong projected growth rate should be higher than 10% going forward.
- I agree Sheng Siong should be valued slightly lower than DairyFarm, as a pure local play.
- It is also consistent with a dividend yield of about 4%
At current price of 78 cents, it is a fair price, IMO
I has vested, @ price <60 cents, when the PE was around 20.
(vested)
I was looking more at the correlation between SS performance and population growth. With larger population (which is quite inevitable), SS will likely be a beneficiary of the larger numbers of grocery consumers. This will be overtime, instead of overnight.
For a small nation, its tough for Singapore to close our doors shut to foreign migrants. The inbound pressure will be great and benefiting SS in various ways.
Just my thoughts.