Sheng Siong

Sheng Siong: Has entered into a non-binding letter of intent with Kunming LuChen Group to operate supermarkets in China via a joint venture (JV). It is envisaged that the JV company will have a registered capital of US$10m, and Sheng Siong will hold 60% of the equity interest in the JV, while the LuChen group will hold 30% of the equity interest, and Sheng Siong’s executive director, Mr Tan Ling San, will hold the remaining 10% of the equity interest in the JV. We highlight that in the latest news comes as a slight shift in strategy for Sheng Siong, as the group had in the past mooted a potential entry into Malaysia and/or Indonesia, although this was held back as the group had no prior experience, and the markets in both countries are dominated by several big players and it would be an uphill task for the company to muscle its way in. As the proposed JV may or may not proceed, shareholders and potential investors are advised to exercise caution, and to seek independent advice from their bankers, stockbrokers, solicitors or other professional advisers if in doubt as to any action to be taken. On its propects, management notes that the weak external environment has affected retail spending in Singapore. While Sheng Siong aims to open new outlets in areas where it does not have a presence, it expects to face keen competition for new retail space. At current price, Sheng Siong trades at 20.1x forward P/E versus its larger, regional peer Dairy Farm at 28.1x forward P/E.