Sheng Siong Investment Research
February 23, 2012
SINGAPORE EQUITY Investment Research
DMG & Partners Research CONSUMER
Melissa Yeap +65 6232 3897 melissa.yeap@sg.oskgroup.com Terence Wong, CFA +65 6232 3896 terence.wong@ sg.oskgroup.com
Retail Sheng Siong is Singapore’s second largest grocer, holding an 18% share of the local market. It owns 24 outlets and three wet market stalls across the island nation, located in the HDB heartlands. Stock Profile/Statistics Bloomberg Ticker STI Issued Share Capital (m) Market Capitalisation (US$m) 52 week H | L Price (S$) Average Volume (‘000) YTD Returns (%) Net gearing (%) Altman Z-Score ROCE/WACC Beta (x) Book Value/share (S¢) Major Shareholders (%) SS Holdings Hock Eng Lim Hock Leng Lim 34.6 12.3 12.3 SSG SP 2,996 1,384 685 0.575 0.310 9,575 12.5 Net Cash Na 2.7 na 10.0
Initiation of coverage
Private Circulation Only
SHENG SIONG GROUP
NEUTRAL Price Previous Target S$0.495 n/a S$0.500
Steady dividends, but upside capped
We initiate coverage on Sheng Siong with a NEUTRAL rating and TP of S$0.50, based on 15x FY12F earnings. The stock offers investors: 1) A unique proxy into Singapore’s resilient supermarket business, one characterised by a strong balance sheet and free cashflows, 2) Management’s commitment to a 90% payout ratio in FY12 translates into a decent 6% yield, 3) Recent move into brand new Mandai Link HQ is expected to boost operating margins as well as provide the much needed infrastructure to back a larger network of stores. Resilient business. Sheng Siong holds an 18% market share in Singapore’s resilient S$4b supermarket industry, ranking it as the second largest grocer in the nation, behind Dairy Farm (which owns Cold Storage, Giant and Shop N Save stores). It’s stores are strategically located in the HDB heartlands, where it targets the wallets of the low-to-mid end masses with its affordably priced goods. It enjoys a strong brand reputation, having bagged the “Superbrand” award for the past four years (2008-11) and has
SINGAPORE EQUITY Investment Research
DMG & Partners Research CONSUMER
Melissa Yeap +65 6232 3897 melissa.yeap@sg.oskgroup.com Terence Wong, CFA +65 6232 3896 terence.wong@ sg.oskgroup.com
Retail Sheng Siong is Singapore’s second largest grocer, holding an 18% share of the local market. It owns 24 outlets and three wet market stalls across the island nation, located in the HDB heartlands. Stock Profile/Statistics Bloomberg Ticker STI Issued Share Capital (m) Market Capitalisation (US$m) 52 week H | L Price (S$) Average Volume (‘000) YTD Returns (%) Net gearing (%) Altman Z-Score ROCE/WACC Beta (x) Book Value/share (S¢) Major Shareholders (%) SS Holdings Hock Eng Lim Hock Leng Lim 34.6 12.3 12.3 SSG SP 2,996 1,384 685 0.575 0.310 9,575 12.5 Net Cash Na 2.7 na 10.0
Initiation of coverage
Private Circulation Only
SHENG SIONG GROUP
NEUTRAL Price Previous Target S$0.495 n/a S$0.500
Steady dividends, but upside capped
We initiate coverage on Sheng Siong with a NEUTRAL rating and TP of S$0.50, based on 15x FY12F earnings. The stock offers investors: 1) A unique proxy into Singapore’s resilient supermarket business, one characterised by a strong balance sheet and free cashflows, 2) Management’s commitment to a 90% payout ratio in FY12 translates into a decent 6% yield, 3) Recent move into brand new Mandai Link HQ is expected to boost operating margins as well as provide the much needed infrastructure to back a larger network of stores. Resilient business. Sheng Siong holds an 18% market share in Singapore’s resilient S$4b supermarket industry, ranking it as the second largest grocer in the nation, behind Dairy Farm (which owns Cold Storage, Giant and Shop N Save stores). It’s stores are strategically located in the HDB heartlands, where it targets the wallets of the low-to-mid end masses with its affordably priced goods. It enjoys a strong brand reputation, having bagged the “Superbrand” award for the past four years (2008-11) and has