Thursday, March 26, 2015

Sheng Siong

Sheng Siong: Share price continues making new all-time highs, which is hardly surprising, given the unanimous Buy ratings on the counter, which placed the supermarket chain as amongst one of the top consumer picks listed on SGX.

The bullish outlook on Sheng Siong is premised on effective cost savings, partly from lower oil price, and the delay in increase of foreign workers levy, which should provide some reprieve to manpower costs.

Additionally, increased hand-outs for the poor as announced in the recent SG50 budget may also benefit retailers like Sheng Siong, which caters to basic needs.

The group’s Block 506 Tampines will also start to derive property income this year, but its impact on 2015 bottom line will not be significant. The store will however be repositioned when most of the tenancies expire in FY16.

Meanwhile, application for licenses and registration are being made for Sheng Siong’s 60% JV to operate supermarkets in Kunming, China, with operations expected to begin in 2H15, although this should not materially impact bottom line yet.

Sheng Siong currently trades at 21.9x forward P/E. Overall, the street has 8 straight Buy calls with a consensus TP of $0.83.

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