Sheng Siong Group’s (SSG) 1Q15 revenue rose 4.6% YoY to S$198.4m, forming 26% of our FY15 forecast. 1.7% of the revenue growth was contributed by the new stores in Penjuru and Tampines, while comparable same store sales growth accounted for the remaining 2.9%. We note that growth also returned for the Bedok store at a higher rate than the average level of 4.6%. Management also confirmed that operations for new stores in Bukit Panjang and Punggol will commence in early May, and the Pasir Ris store by June. We expect these new aforementioned stores to drive growth for the next two to three years. Following an upwards revision to our growth assumptions, our DCF-derived fair value estimate increases to S$0.92 (prev S$0.81). Maintain BUY.
1Q15 results in-line
Sheng Siong Group’s (SSG) 1Q15 results were within our expectations as this quarter typically enjoys decent results on the back of Chinese New Year festival spending. Revenue rose 4.6% YoY to S$198.4m, forming 26% of our FY15 forecast. 1.7% of the revenue growth was contributed by the new stores in Penjuru and Tampines, while comparable same store sales growth accounted for the remaining 2.9%. Slightly lower input costs enjoyed from bulk handling of goods helped maintain gross profit margin at a level of 24.4%. In addition to stable expense levels, the group received extra rental income of about S$0.55m from tenants in Block 506 Tampines Central. As a result, we saw operating margin improve by six ppt YoY. Net profit also increased 12.2% YoY to S$14.1m.
Improved performance in Bedok store
After the completion of construction near its Bedok Central store, growth returned at a higher rate than the group’s average rate of 4.6% in 1Q15. Management viewed this as a testament to their branding strength, as there is a competitor’s store located quite closely. While the performance for the store in Tekka is only expected to improve when the construction of the Downtown MRT Line completes in 2017, it did not pose as a drag.
New stores to start operations by May; Maintain BUY
We had previously highlighted the importance of new store expansion to SSG’s growth potential, especially in view of the 41k sq ft Woodlands store closure in 2017. Following the opening of its Penjuru and Tampines stores in Dec-14 and Jan-15, management expects to commence operations in early May-15 for two new stores in Bukit Panjang (5.2k sq ft) and Punggol (3.4k sq ft). Management achieved a successful bid for another store in Pasir Ris (3.2k sq ft), and we understand that this store should be operational by June-15. We expect these new aforementioned stores to drive growth for the next two to three years. Following an upwards revision to our growth assumptions, our DCF-derived fair value estimate increases to S$0.92 (prev S$0.81). Maintain BUY.
Sheng Siong Group’s (SSG) 1Q15 results were within our expectations as this quarter typically enjoys decent results on the back of Chinese New Year festival spending. Revenue rose 4.6% YoY to S$198.4m, forming 26% of our FY15 forecast. 1.7% of the revenue growth was contributed by the new stores in Penjuru and Tampines, while comparable same store sales growth accounted for the remaining 2.9%. Slightly lower input costs enjoyed from bulk handling of goods helped maintain gross profit margin at a level of 24.4%. In addition to stable expense levels, the group received extra rental income of about S$0.55m from tenants in Block 506 Tampines Central. As a result, we saw operating margin improve by six ppt YoY. Net profit also increased 12.2% YoY to S$14.1m.
Improved performance in Bedok store
After the completion of construction near its Bedok Central store, growth returned at a higher rate than the group’s average rate of 4.6% in 1Q15. Management viewed this as a testament to their branding strength, as there is a competitor’s store located quite closely. While the performance for the store in Tekka is only expected to improve when the construction of the Downtown MRT Line completes in 2017, it did not pose as a drag.
New stores to start operations by May; Maintain BUY
We had previously highlighted the importance of new store expansion to SSG’s growth potential, especially in view of the 41k sq ft Woodlands store closure in 2017. Following the opening of its Penjuru and Tampines stores in Dec-14 and Jan-15, management expects to commence operations in early May-15 for two new stores in Bukit Panjang (5.2k sq ft) and Punggol (3.4k sq ft). Management achieved a successful bid for another store in Pasir Ris (3.2k sq ft), and we understand that this store should be operational by June-15. We expect these new aforementioned stores to drive growth for the next two to three years. Following an upwards revision to our growth assumptions, our DCF-derived fair value estimate increases to S$0.92 (prev S$0.81). Maintain BUY.
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