Tuesday, October 11, 2011

Sheng Siong

Sheng Siong: IIFL retain Buy with TP $0.61. Note that SSG’s profit growth will be underpinned by store expansion and margin improvement, SSG has 27 outlets vs NTUC 123 outlets, nearly 18 zones comprising 46% of Spore’s resident population do not have an SSG outlet nearby; as such, SSG can double its outlets.

Better product mix and efficiency gains due to the new warehousing and distribution centre will drive margin expansion by 2-3% over 2010-13. Estimate SSG to register 23% Net Profit (core) CAGR over 2011-13. Counter currently trades at 11x FY12 P/E, which is at a discount to other Asian retailers. Stock has an attractive 6.6% div yield, as the mgt has committed to 90% payout ratio for the nxt 2yrs.

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