Sheng Siong

Sheng Siong: is acquiring a 6 units of properties with combined estimated area of 18,610 sf at 18 Yishun Ave 9, from private developer CEL Devt, to expand its supermarket count in Spore to 34. The space is part of a new mixed 14-storey devt comprising retail and residential components, with expected TOP by Jun ’17. The price works out to $2950 psf, in line with current mkt prices. Maybank-KE says the new site looks promising, as it will be in the heart of Yishun with easy access to the MRT and good human traffic. Mgt notes also there are no other supermarkets in walking vicinity, and there will be access to a multi-storey carpark. Still contribution is too far out to make any substantial impact to earnings forecasts. The house maintains its Sell call with TP $0.54 (18.5x FY14e P/E), noting that Sheng Siong’s shift away from its asset-light model is negative, as i) it will likely impact the co’s ability to sustain its 90% payout ratio, and ii) is a signal that the co will continue to face challenges in securing immediate sites for rental, which will limit growth.