Sheng Siong

Sheng Siong: 1Q14 net profit grew 19.3% to $12.5m while topline increased 5% to $189.7m. Increased sales were from 8 new stores in 2012, as well as a 3% increase on a SSSG basis, result of longer operating hours and increased marketing initiatives. Bottom line was improved by gross margin which climbed 1.3ppt to 23.8%, due to adjustment to rebates received, as well as efficiency gains from the Mandai distribution center. Increase in admin costs arose from higher bonus provision for better performance in 1Q14 vs 1Q13. Sheng Siong did not find a suitable retail space to open stores in 1Q14, this being the same from FY13. It now has 33 stores. The supermarket space competition is likely to continue, while cost pressures on food and manpower would remain the trend. Management will continue its margin enhancement activities. Sheng Siong trades at annualized 1Q14 P/E of 16.5x Daiwa remains O/PF with TP of $0.67