Looking ahead, 4Q14 will see contribution from Sheng Siong Group’s new ~4.0k sq ft store in the Penjuru area that recently started operations. The acquisition of Block 506 Tampines Central 1 will also likely follow through despite a delay, thus we have included the associated capex of S$65m into our assumptions. Some upside could be seen if management succeeds in opening this store (~9.8k sq ft) before the next Chinese New Year to reap the benefits of higher sales during the festive season. Store expansion within the next two years will play a significant role to ensure the closure of its ~42k sq ft Woodlands store in 2017 will not adversely affect financial performance. At this juncture, we expect steady growth albeit at moderated levels and revise our assumptions for revenue growth in FY14F/FY15F to 5.5%/5.2% (previous: 6.5%/6.0%). Due to a change in analyst coverage, we derive a new FV estimate of S$0.77 (previous: S$0.78) and maintain BUY.
Expect new stores to contribute in FY15
Sheng Siong Group (SSG)’s new ~4.0k sq ft store in the Penjuru area that is targeted at residing foreign workers has started operations for 4Q14, bringing the total number of stores in Singapore to 34. SSG also met with a delay in relation to its acquisition of Block 506 Tampines Central 1 due to regulatory approvals, but it will likely follow through thus we factor the associated capex of S$65m into our assumptions. Some upside could be seen if management is successful in its push to open this new store (~9.8k sq ft) before the next Chinese New Year to reap the benefits of higher sales during the festive season. We keep in mind that the remaining ~26.2k sq ft of retail space suggests any eventual expansion would translate to higher revenue contribution from the Tampines store.
Growth may see moderation
We would like to highlight that the eight new stores added in 2012 could be reaching normalised growth rates. Looking ahead, in view of the expected closure for its ~42k sq ft Woodlands store in 2017, we note the importance of store expansion in the next two years for SSG. The ~19k sq ft Yishun J9 store slated to open in 2017 would partially offset the loss in resulting revenue contribution but clearly effects would be marginal as a new store needs time to achieve optimum contribution level. While holding a significant cash balance, SSG has to show that they are readily capturing opportunities to ensure its business continue to achieve growth in the coming years. At this juncture, we expect steady growth albeit at moderated levels and revise our assumptions for revenue growth in FY14F/FY15F to 5.5%/5.2% (previous: 6.5%/6.0%).
Maintain BUY with new S$0.77 FV
Store expansion in Singapore will remain as SSG’s key growth driver. With regards to its plans in e-commerce as well as extending presence in China, we believe good planning and execution will take time and do not consider these to be catalysts yet. Due to a change in analyst coverage, we derive a new FV estimate of S$0.77 (previous: S$0.78) and maintain BUY.
Sheng Siong Group (SSG)’s new ~4.0k sq ft store in the Penjuru area that is targeted at residing foreign workers has started operations for 4Q14, bringing the total number of stores in Singapore to 34. SSG also met with a delay in relation to its acquisition of Block 506 Tampines Central 1 due to regulatory approvals, but it will likely follow through thus we factor the associated capex of S$65m into our assumptions. Some upside could be seen if management is successful in its push to open this new store (~9.8k sq ft) before the next Chinese New Year to reap the benefits of higher sales during the festive season. We keep in mind that the remaining ~26.2k sq ft of retail space suggests any eventual expansion would translate to higher revenue contribution from the Tampines store.
Growth may see moderation
We would like to highlight that the eight new stores added in 2012 could be reaching normalised growth rates. Looking ahead, in view of the expected closure for its ~42k sq ft Woodlands store in 2017, we note the importance of store expansion in the next two years for SSG. The ~19k sq ft Yishun J9 store slated to open in 2017 would partially offset the loss in resulting revenue contribution but clearly effects would be marginal as a new store needs time to achieve optimum contribution level. While holding a significant cash balance, SSG has to show that they are readily capturing opportunities to ensure its business continue to achieve growth in the coming years. At this juncture, we expect steady growth albeit at moderated levels and revise our assumptions for revenue growth in FY14F/FY15F to 5.5%/5.2% (previous: 6.5%/6.0%).
Maintain BUY with new S$0.77 FV
Store expansion in Singapore will remain as SSG’s key growth driver. With regards to its plans in e-commerce as well as extending presence in China, we believe good planning and execution will take time and do not consider these to be catalysts yet. Due to a change in analyst coverage, we derive a new FV estimate of S$0.77 (previous: S$0.78) and maintain BUY.
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