Sheng Siong

Sheng Siong: 3Q14 results were in line with net profit rising 15.4% to $12.2m, while revenue increased 4.8% to $186.4m, mainly due to a 3.4% increase in same store sales growth, driven by marketing activities. The remaining growth came from new stores. Bottom line was improved by strong gross margins 24.2% (+1ppt) despite inflationary and labor pressures thanks to competitive and bulk purchasing, and other cost management initiatives centered around the Mandai warehouse. Store count remained the same as end 2012 at 33 stores, although to date it has acquired 3 stores. The Penjuru store with an area of ~4,000 sf should be opened in Nov’14. Meanwhile, the store in Tampines is unlikely to be opened in FY14. Sheng Siong will use the $80.4m proceeds from a placement done in September to fund future expansion plans. Sheng Siong is currently trading at 4.57% indicative yield, and 18.6x annualized 9MFY14 P/E. Latest broker rating: Daiwa maintains O/PF with TP of $0.75