Sheng Siong Group’s (SSG) FY12 results met our expectations with revenue increasing 10.2% YoY To S$637.3m while prudent cost management ensured an improvement in core operating profit margin by 0.3 ppt to 6.2%. In addition, core PATMI rose 14.8% YoY to S$31.3m. Management also declared a final dividend of 1.75 S cents (versus 1.77 S cents in FY11), and committed to extend its 90% PAT payout policy for another two years. We are positive on the outlook for SSG in FY13 on the back of i) full-year contributions from the eight new stores, ii) margin stability, and iii) defensive consumer spending in the face of continued economic uncertainty. Therefore, we reverse our previously conservative assumptions and raise our fair value to S$0.69 from S$0.58 previously. Upgrade to BUY.
FY12 closes on a good note
Sheng Siong Group’s (SSG) FY12 results met our expectations with revenue and net profit coming within 2% of our estimates. Top-line grew 10.2% YoY to S$637.3m while prudent cost management ensured an improvement in core operating profit margin by 0.3 ppt to 6.2% (excluding one-off gain of S$10.4m from the sale of its Marsiling warehouse). Management also declared a final dividend of 1.75 S cents (versus 1.77 S cents in FY11), and committed to extend its 90% PAT payout policy for another two years.
Outlook positive for SSG
The Group will enjoy full-year contributions from the eight new stores opened in FY12 so top-line growth should start at a healthy base. In addition, consumer sentiment remains tentative with the lingering economic uncertainty, and this has featured in the recent retail sales data where dining out has declined on a YoY basis. With this trend likely to persist in the coming quarters, we expect spending at supermarket chains like SSG to benefit.
Expansion target remains; cost management to continue
Management retains its 10% retail space growth target, which we feel is achievable. With ongoing estate rejuvenations plans for older estates such as Hougang, rental opportunities will present themselves. In terms of wage pressures, SSG has managed it admirably well thus far so we expect gradual cost increases to keep pace with revenue growth.
Valuation raised; upgrade to BUY
In light of the possible turn in consumer sentiment, we reverse our previously conservative assumptions and raise our FY13/14F projections to incorporate greater consumer spending, store openings. Our fair value increases to S$0.69 from S$0.58 previously. Upgrade to BUY.
Sheng Siong Group’s (SSG) FY12 results met our expectations with revenue and net profit coming within 2% of our estimates. Top-line grew 10.2% YoY to S$637.3m while prudent cost management ensured an improvement in core operating profit margin by 0.3 ppt to 6.2% (excluding one-off gain of S$10.4m from the sale of its Marsiling warehouse). Management also declared a final dividend of 1.75 S cents (versus 1.77 S cents in FY11), and committed to extend its 90% PAT payout policy for another two years.
Outlook positive for SSG
The Group will enjoy full-year contributions from the eight new stores opened in FY12 so top-line growth should start at a healthy base. In addition, consumer sentiment remains tentative with the lingering economic uncertainty, and this has featured in the recent retail sales data where dining out has declined on a YoY basis. With this trend likely to persist in the coming quarters, we expect spending at supermarket chains like SSG to benefit.
Expansion target remains; cost management to continue
Management retains its 10% retail space growth target, which we feel is achievable. With ongoing estate rejuvenations plans for older estates such as Hougang, rental opportunities will present themselves. In terms of wage pressures, SSG has managed it admirably well thus far so we expect gradual cost increases to keep pace with revenue growth.
Valuation raised; upgrade to BUY
In light of the possible turn in consumer sentiment, we reverse our previously conservative assumptions and raise our FY13/14F projections to incorporate greater consumer spending, store openings. Our fair value increases to S$0.69 from S$0.58 previously. Upgrade to BUY.
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