Sheng Siong Group’s (SSG) FY11 results were broadly in-line with our expectations. Revenue fell 8% YoY to S$578m following the closure of the two key outlets while net profit fell 36.1% to S$27.3m in the absence of trading gains. SSG’s top-line figure exceeded our revenue projections slightly by 2.3% but an unexpected tax charge caused SSG’s net profit to come in under our projected S$31m. A final dividend of 1.77 SG cents per share was declared (90% of net profit as previously committed) for a dividend yield of 3.6%. Going forward, we expect revenue and net profit to pickup strongly in FY12 with the opening of new stores. As SSG’s results were in-line with our expectations, we keep our FY12 assumptions unchanged and roll our valuation forward to FY12, which increases our fair value estimate to S$0.49 from S$0.44 previously. With a committed 90% of net profit payout in FY12, we are expecting an attractive dividend yield of about 5.8%. Maintain HOLD.
FY11 results within expectations
Sheng Siong Group’s (SSG) FY11 results were broadly in-line with our expectations. Revenue fell 8% YoY to S$578m following the closure of the two key outlets while net profit fell 36.1% to S$27.3m in the absence of trading gains. SSG’s top-line figure exceeded our revenue projections slightly by 2.3% but an unexpected tax charge caused SSG’s net profit to come in under our projected S$31m. The increase in tax was related to sale of investments in 2009 and SSG is currently requesting IRAS to review the tax assessment. A final dividend of 1.77 SG cents per share was declared (90% of net profit as previously committed) for a dividend yield of 3.6%.
Pickup in revenue and net profit in 2012
With retail space recovering and now exceeding 2010 levels, we expect revenue to pick up strongly in FY12. FY11 bore the burnt of the initial start-up phases of the four new store locations and should start contributing significantly to SSG’s top-line this year. In addition, four new stores are planned to commence operations by end 2Q2012. In terms of costs, we expect SSG to at least maintain its gross profit margins at current levels of around 22% through cost savings from its new distribution centre (higher rebates and direct sourcing) and through its continued push to maintain a revenue mix of at least 30% fresh produce for each store location, which yields higher gross profit margins.
Maintain HOLD at higher fair value
As SSG’s results were in-line with our expectations, we keep our FY12 assumptions unchanged and roll our valuation forward to FY12, which increases our fair value estimate to S$0.49 from S$0.44 previously. With a committed 90% of net profit payout in FY12, we are expecting an attractive dividend yield of about 5.8%. Maintain HOLD.
Sheng Siong Group’s (SSG) FY11 results were broadly in-line with our expectations. Revenue fell 8% YoY to S$578m following the closure of the two key outlets while net profit fell 36.1% to S$27.3m in the absence of trading gains. SSG’s top-line figure exceeded our revenue projections slightly by 2.3% but an unexpected tax charge caused SSG’s net profit to come in under our projected S$31m. The increase in tax was related to sale of investments in 2009 and SSG is currently requesting IRAS to review the tax assessment. A final dividend of 1.77 SG cents per share was declared (90% of net profit as previously committed) for a dividend yield of 3.6%.
Pickup in revenue and net profit in 2012
With retail space recovering and now exceeding 2010 levels, we expect revenue to pick up strongly in FY12. FY11 bore the burnt of the initial start-up phases of the four new store locations and should start contributing significantly to SSG’s top-line this year. In addition, four new stores are planned to commence operations by end 2Q2012. In terms of costs, we expect SSG to at least maintain its gross profit margins at current levels of around 22% through cost savings from its new distribution centre (higher rebates and direct sourcing) and through its continued push to maintain a revenue mix of at least 30% fresh produce for each store location, which yields higher gross profit margins.
Maintain HOLD at higher fair value
As SSG’s results were in-line with our expectations, we keep our FY12 assumptions unchanged and roll our valuation forward to FY12, which increases our fair value estimate to S$0.49 from S$0.44 previously. With a committed 90% of net profit payout in FY12, we are expecting an attractive dividend yield of about 5.8%. Maintain HOLD.
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