Sheng Siong: 1QFY15 net profit rose 12.2% to $14.1m, while revenue increased 4.6% to $198.4m, where 1.7% was contributed by the two stores, which opened in Dec ’14 and Jan ’15 respectively, while 2.9% was from same-store sales growth.
Management highlighted that 1Q15 began strong during the festive season, but demand faded in March, likely on weak conditions as seen in FY14. Bedok Central store’s revenue growth recovered, but Tekka store’s growth stayed flat.
Gross margin improved 0.6ppt to 24.4%, from cost savings from the distribution centre. Higher rental income, which grew 2.6x to $0.9m from tenants at Block 506 Tampines Central, as well as government grants also contributed to bottom line.
Operating expenses increased 7.7% to $33.9m, driven primarily by staff costs (higher bonus provisioning and new stores headcount), FX, and higher depreciation from new trucks.
On operational updates, management secured new leases at Bukit Panjang (5,220 sf) and Punggol (3,360) from HDB, and these stores should commence operations in May. Meanwhile, Sheng Siong is currently awaiting HDB to grant the lease for another new store at Pasir Ris (3,200 sf). The McNair store which is closed for refurbishment in Apr should continue operations in May.
On the JV with LuChen Group to operate supermarkets in Kunming, operations should begin in 2H15, but management does not expect to be profitable this year.
Sheng Siong is trading at 23x consensus FY15 P/E.
Latest broker ratings:
JPMorgan maintains Overweight with TP of $0.81
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