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Wednesday, 12 April 2017

Sheng Siong

12/4/2017
Accumulate
  1. Attractive dividend yield 3.83% and growing consistently
  2. Decent valuation PE 23.5 with strong fundamentals - no debt, consistent profitability, stable industry
  3. Growth story - expansion into China
Metrics
  • Market Cap S$1.47bn, Float 34.41%
  • Last done (as of 12/4/2017) S$0.995
  • PE 23.5, PB 5.8, EV/EBITDA 15.7
  • Dividend yield 3.83%, Dividend CAGR 5.7%, very consistent
  • Revenue CAGR 4.5%, Earnings CAGR 8.4%, very consistent
  • Total Debt to Equity 0%
  • ROE 25.1%, ROA 12.4%
Operations
  • Supermarkets - 43 locations all across Singapore as at October 2016
  • As of April 2015, the company offers over 400 products under their 10 house-brands
  • Extensive distribution network, food-processing facilities, and warehousing facilities
  • Currently revenue only from Singapore, but soon to include China
Investment thesis
  • Expansion into China - "The Group envisaged that the supermarket in Kunming, China may be operational from 3Q2017" - 4Q2016 report
  • The group will continue to expand its store count and improve its current stores through renovation or refitting
Risks
  • Increased competition
  • Failure to bid for new stores
  • Delays in expansion into China
  • Increased food prices and the company is unable to pass on higher costs to consumers
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