To The Moon

🌟🌟🌟Sheng Siong $Sheng Siong(OV8.SI)$  is the third largest supermarket chain in Singapore, behind NTUC Fair Price and Dairy Farm.    Its share price reached its 52 week high this week at SGD 1.58. 

  Is Sheng Siong A Buy?

Sheng Siong was established in 1985 and one of Singapore's top retailers with more than 74 locations across Singapore.  It is synonymous with offering value for money to its customers. 

Sheng Siong reported a net profit of SGD 70 million for the 6 months ended 30 June 2024 (1H FY2024) which is an increase of 6.8% year over year.

Revenue for 1H FY 2024 increased by 3.4%year over year to SGD 714.2 million, compared to SGD 690.5 million in 1H FY 2023.  This was largely driven by a longer sales period prior to the Lunar New Year in February 2024.

Gross Profit increased by 4.8% to SGD 215 million compared to SGD 205.1 million in 1H FY 2023.  The Group's profit margin remains relatively stable in 1H FY 2024 with a slight growth of 0.4% to 30.1%.  This was mainly due to improvements in the sales mix but also to rising staff costs. 

Other income for 1H FY 2024 increased by 45.4% year over year to SGD 7.3 million, due to higher government grants and higher miscellaneous income. 

In 1H FY 2024, Sheng Siong's selling and distribution expenses increased by SGD 3.8 million or 3.5% to SGD 113.5 million, administrative expenses increased by SGD 3.5 million or 14.1% to SGD 27.9 million.  These were due to higher staff variable bonuses because of stronger financial performance. 

In 1H FY 2024 cash flow from operating activities increased to SGD 93 million compared to SGD 77.8 million in the same period last year.  Sheng Siong's cash position continues to stand at a strong position of SGD 349.6 million compared to SGD 324.4 million as of December 2023.

Following the resilient financial performance, the Board of Directors has proposed an interim dividend of 3.2 cents per share.  This is a Dividend yield of 4.05%.

Sheng Siong is continuing to expand with the latest acquisition of DFI's last 2 Singapore properties for SGD 50.2 million with the transaction to be completed by 30 October 2024 and fully funded by internally generated funds.  This acquisition is in line with Sheng Siong's store expansion strategy with added option of rental income and long term capital appreciation.  The 2 properties are in Siglap V and Toa Payoh. 

Performance wise Sheng Siong is up 1.9% for the week but still down 0.6% year todate.  In 2023 Sheng Siong has risen 5.3%.  But if we look back the past 5 years, Sheng Siong is up 37% and since its listing in SGX in 2011 it is up 351%.

DBS Research Analysts are upgrading Sheng Siong to a Buy with a higher Target Price of SGD 1.80.  This is due to higher valuation, given lower equity risk premium and higher dividend payout due to falling interest rates. 

DBS Research said that Sheng Siong has an excellent execution record and expects accelerated growth in 2025 due to new store openings. 

I am bullish on Sheng Siong due to its extensive distribution network and value for money focus.  Sheng Siong is also in the Consumer Staples Sector which makes it more resilient in economic cycles.  I also like that Sheng Siong 's expansion policy of opening new outlets which will improve its revenue.  Sheng Siong also has an excellent management team under CEO Lim Hock Chee. 

Sheng Siong is a slow and steady kind of stock if a little boring.  But I believe that with patience and time in the market, it will continue to grow exponentially in the future. 

Go Long Go Strong Go Sheng Siong 

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