Sheng Siong (SGX:OV8)- This Retail Story is Not Done Yet

Sheng Siong (SGX:OV8) was established in 1985 and listed on SGX Mainboard in August 2011. It is one of Singapore’s largest retailers with 63 stores across the island. To date, Sheng Siong has over 1,400 products under 23 house-brands. Its first overseas store in Kunming, China opened for business in 2017 and a second in June 2019.

Sheng Siong has focused on increasing the number of stores as well as increasing the same store sales on YoY basis.

Growth of Number of Stores

It has consistently increased its number of stores over past 10 years. As of FY20, it has a total store count of 63 (though, the below bar-chart does not include the FY20 figure).

Financial Performance

Revenue

Revenue has grown at CAGR of 11.84% over past 5-year period.

Net Profit

Net Profit has grown at CAGR of 17.3% over past 5-year period.

Net and Gross Margin

It has improved its gross margin consistently over past 10 years. Its gross margin for FY20 stands at 27.4%. Net margin still has some room for an improvement but on overall level it has remained decent.

Earnings Per Share

Earnings Per Share (EPS) has grown at CAGR of 17.2% over past 5-year period.

Dividend Per Share

Dividend Per Share (EPS) has been consistently very decent over past 5-year period. Current Dividend Yield is close to 4.1%.

Given the cash balance of $253.9 million at the end of FY20 and a cash generative business with operating cash flow of $274 million for FY20, the company continues to be in a good position to keep rewarding shareholders with a decent dividend in coming years as well.

Valuation

P/E

Its 8-year historical average P/E is close to 21. The current P/E as of 27 April 2021 is close to 16.8, which is quite less than its historical P/E.

P/B

Its 8-year historical average P/B is close to 5.2. The current P/B as of 27 April 2021 is close to 6.2, which is at a little uncomfortable level vis-à-vis its historical P/B.

Near to medium term trigger

COVID19 related restrictions are getting lifted. As the life will become a bit more normal, the demand will go down to the pre-COVID level. But that should not be a concern for its future growth as the company is focusing on improving cost efficiency and enhancing productivity by embracing new technology, digitization and innovation.

Company is constantly on a lookout for a new store. With a strong cash balance, company will be able to increase the store count further without any additional leverage.

Disclaimer

Our content is for informational purpose only. We don’t recommend the stocks by such analysis. You must do your own research before undertaking any investment making decision.

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Published by Amit

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